Shopping around for a great trade at a nice entry level? Here’s how I’m trading Shopify ($SHOP) (August 03, 2020)


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I want to look at Shopify ( NYSE: SHOP ) here. The company reported pretty strong earnings and look what the stock did, it rallied up and then, it drifted lower. It happens a lot; a stock will suck people in, retail folks who are eager to buy before everybody else gets a chance, they want to be first in line and they pay the high price.

A lot of times a stock will just crap down and you never hear from it again. Sprouts Farmers Market ( NASDAQ: SFM ) kind of did that. This is what not to do here; but Shopify ( NYSE: SHOP ), this is how I am trading this. The stock gaps up, trades down, and then it just kind of stabilizes here. So if we are looking at the trading range since earnings, this is where it is. So you can see it is very close to squirting out the top of the box again.

I took a little position in this today, right around 1050.00, something like that, maybe even a little bit higher, I forget. I am up a little bit on it, not enough to brag about, I am basically in right here. I am going to add to that position if the stock breaks out above $1100.00. And my theory is, look, the stock doesn’t even come back and test the 50-day moving average.

When a stock is strong like this the only way the stock is moving the way it is because institutions are buying. So you look for the tests of the 50-day moving average as kind of a litmus test to see whether institutions are still buying or not. If institutions are still buying the stock should hold somewhere around the 50, maybe not exactly there but you would be surprised at the proximity to the 50-day moving average that a trading low will hit because that is where institutions step in.

So I see this little drift here and we’ve got these little, I call them pinch and pops, we’ve got these little pinch and pops here kind of like we had here, same deal, where the stock squirts higher and then keeps going. We have got a lot of those going at Stock Market Mentor but now we are right in this no man’s land between 1000.00 and 1100.00. So take a small position here and then I am looking for a breakout to add to that position; I think this is going to work.

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