Here’s your trade (again), on Shopify ($SHOP) – December 14, 2023
This is Dan Fitzpatrick with FITZ IN FIVE. I want to look at Shopify ( NYSE: SHOP ).
I have looked at this earlier, and I’ve covered this a few different times. The stock is in a really nice uptrend and, ultimately, I think it’s going higher. But here’s the deal, this anchored VWAP, as I mentioned the other day, I started this on the day that the company reported earnings.
I like to do this because it gives me a reference for where the volume is on any given day. Is it low or high, relative to what has come before? Relative to how much stock has traded, and at what price since this big event, so it starts tracking here. It had gone both ways, mostly, actually below.
Then, just yesterday it broke out, and I mentioned that this was a good sign and that Shopify ( NYSE: SHOP ) would be a good one to own. I didn’t know it was going to break out over 4 percent today, so don’t think I’m telling you I have a crystal ball. The stock has done what I thought it would do, I just didn’t know it would run up so much in a day.
This is a powerful indicator. Look at the volume, we’ve got just 10 minutes to go so it should be right around here, you can see it tapering off as we go into the close. What is interesting to me here is, there are 3 kinds of gaps. There is the breakaway gap, which is here, it breaks away from this nasty downtrend.
Then there is the continuation gap, which, as the name implies, gaps and continues the trend that started here with the breakaway gap. And then finally, there is the exhaustion gap. And that very well could be this one. In an exhaustion gap you say, “Okay, it’s time to get out.” I don’t see it this way for this stock.
I think it is not good trading to be so dogmatic about it because you are actually missing a key point. Who said there can only be 1 continuation gap? There might be 19 of them, or there might not be any. You have to look at these things, there would be only 1 breakaway gap because you are breaking away from something.
But with respect to a continuation, stock can keep gapping up, and gapping up, and gapping up. That is actually a good thing. I will take 20 stocks if they all do that. And then finally, the exhaustion gap, which is the typical thing that you will see at the end of a big move. This ( NASDAQ: AVGO ) just comes to mind, but I’m not saying it is going to happen here, in fact, I’m saying it is probably not.
On a stock like this ( NASDAQ: AVGO ) that has gone up so far, so fast, this is a really, really steep, steep move. You could see, at some point, traders come in and say, “Oh my gosh, I have got to get this stock.” So they bid it up first thing in the morning and all the sellers that were there, sitting around waiting, are going to say, “Okay, guess what, we’re going to sell.”
That’s an exhaustion gap just because the buyers get exhausted. That is not what is happening here, and I don’t think it is happening with Shopify ( NYSE: SHOP ) either. I think this is a good stock for you to be owning. It can come back into the range here, as long as it stays above 70.00, that’s about a 10 percent downside, I think you’re good to go.
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