Here’s how I’m trading Shopify ($SHOP) (August 09, 2019)
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I want to look at Shopify ( NYSE: SHOP ). This has excellent fundamentals and the stock doesn’t really give you much of an opportunity to buy the stock at the 50-day moving average. If you’re looking at it, if you’re looking at the way the stocks ha traded this year it never came up and touched the 50-day moving average, not really even here, it came close.
I had been watching this stock and we are in kind of stock stalking mode right now. Some stocks, this is a good one, it’s working well for us, they’re working well. But a lot of stocks, they’re really, really solid companies with great fundamentals but the stocks are not cooperating. A lot of the reason for that is because the overall market is kind of in this corrective mode. We don’t have good times like we used to things are struggling.
I’m looking at Shopify ( NYSE: SHOP ) though, and this is defying the market. If you look at the QQQs ( NASDAQ: QQQ ), they’ve been really struggling here since they peaked. Well, Shopify ( NYSE: SHOP ) barely kind of drifted sideways here a little bit and now it’s up at new highs every day. And so I just want to explain how I am trading this stock. I first got this stock back on this day. Well, I made a little note to myself; we added this to the Growth Stock List on this day, on this test.
The only way you’re going to be doing that type of thing is if you’re watching the stock and you’re just patiently waiting for your move. You know why you want to buy the stock you’re just waiting for the time to buy the stock. So I was waiting and waiting and waiting and then finally took the stock here. And I actually, just today, bought a little bit more right around here, I think it was actually a little lower than 370.00.
Anyway, I drew this box because it’s kind of part of my process. When we’re looking at trendlines, moving averages, I look at the 50-day moving average on this chart as this is the amount that this stock could pull back, so that is around 317.00, now the stock is up at 370.00. That’s the equivalent of $5.00 on a $37.00 stock as opposed to a 370.00. Sometimes the numbers can get lost when these stocks are multiple hundred dollars but this is a huge 15 percent pullback just to where you’re wondering whether you’re going to be wrong and the stock peaked here or whether it’s a good opportunity to buy.
This was a great entry here; this is a different trade here. I bought because I wanted additional exposure to the stock. But I was also looking at this thinking, all right will we could get a little pull back, back into the box here, that’s kind of likely but certainly not today, maybe not Monday or Tuesday. So I’ll go ahead and take some more stock, part of the reason for that is trendlines. First of all, we had this little pinch and pop, which I had drawn a while ago and then this is the current one. So it was just yesterday that the stock popped out above this flat top and it’s still going and volume is increasing, so it’s coming out of a little volatility squeeze.
Also, look at the stack of moving averages. First of all, all of them are drifting higher and so you’ve actually got the price above the 8- day exponential moving average, the 20-day, the 50-day and the 200. So this is literally the strongest thing that a stock can do, this is doing it right now. So I’m taking this trade here, the one that I just put on today, as kind of a swing trade. I’ll take it up as far as it’ll go and then hopefully I’ll close that out for a profit. What that does is, it allows me to drop my cost basis in my first buy. And so I’m gradually, through these little swing trades, reducing the cost basis in a number of shares that I intend to hold through the swings here.
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