Why SHOP Might Actually Hit $105

Disclosure: SHOP became a Daily Market Report short swing trade on October 9 with an entry of $141.03. We covered half this morning at $136.87 and half at $132.09 for $4.16 and $8.94 gains, respectively.

As I said earlier today, “if the generals are breaking down and running away from the battle, the troops won’t be far behind.”

Let's look at one of the most important generals – Shopify (SHOP).

SHOP has been a big winner from January 2017 when it broke out from 38 running up to 176 in late July, 18 months later.

SHOP shows 3 weekly signal reversals bars from the upper rail of a trend channel.

Now it is perched on the bottom of the trend channel with downside follow through threatening a sharp decline — breaks of triple bottoms or triple tops often signal fast moves.

Additionally, SHOP is testing its 50 week m.a. which ties to its 200 day m.a.

These should define support if SHOP is bullish, but if the line of least resistance is lower as implied by follow through by the subsequent behavior of SHOP’s turndown of its 3 Day Chart on Monday, then a significant sell-off may be on the table.

Downside follow-through will snap the Neckline of a Head & Shoulders top pattern, projecting to as low as 105.

Yesterday, the Daily Market Report went short SHOP at $141.03. As noted above, we covered half this morning at $136.87 and half at $132.09 for $4.16 and $8.94 gains, respectively.

Conclusion. When the benchmark SPX is at a pivotal juncture, as it looks to be, the leading stocks of the prior rally will often telegraph the direction of that pivot.

Positions: SHOP

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