For his second "Executive Decision" segment of the Wednesday night Mad Money show, host Jim Cramer spoke with Harley Finkelstein, president of Shopify (SHOP) , the e-commerce platform that is enabling thousands of small businesses across the country.
Finkelstein said small businesses are the backbone of the economy and our country needs more entrepreneurs. This group has proven to be incredibly resilient and adaptable throughout the pandemic. That's how Shopify has grown to account for 9% of all e-commerce.
Shopify is about a lot more than just selling online, however. Finkelstein said Shopify is a retail operating system that allows merchants to sell both online and offline. The company provides capital, payment services, fulfillment and more to innovative startups.
One of those startups was Denise Woodard, founder of Partake Foods. Woodard explained that for just $50 a month, she was able to get started with Shopify and build a successful food business, even during a pandemic.
We reviewed the charts of SHOP back on February 16 and wrote that "Finding" and "riding" a ten-bagger is a trader's dream. A big enough position can be a real life changer. SHOP is about to become the latest ten-bagger for buyers back in 2018. Even though we now have a $2,310 price target from the Point and Figure chart I would still think long and hard about ringing the cash register around $1,500." SHOP rallied to $1,499.75 so I will assume that readers took profits.
Let's review the charts.
In this daily bar chart of SHOP, below, we can see that prices corrected into early March and tested the rising 200-day moving average line. The slope of the shorter and more response 50-day moving average line has weakened. Prices are also holding at the upper end of a $1,100-$900 support area.
The On-Balance-Volume (OBV) line shows weakness from the middle of February and the Moving Average Convergence Divergence (MACD) oscillator has fallen below the zero line this month for an outright sell signal. The MACD oscillator has narrowed in recent days and could edge closer to a cover shorts buy signal.
In this weekly Japanese candlestick chart of SHOP, below, we can see a mixed picture. Prices are still in a longer-term bull trend and are trading above the rising 40-week moving average line. The recent weeks show lower shadows for a rejection of the lows. The trading volume has been weakening since April and increased on the recent decline.
The weekly OBV line shows some slight weakness since January. The MACD oscillator shows a lower high in February and a downside crossover for a take profit sell signal. The lower high in February is also a bearish divergence when compared to the higher price high.
In this daily Point and Figure chart of SHOP, below, we can see that the software is projecting a potential upside price target in the $1,375 area. Is the selloff over?
In this weekly Point and Figure chart of SHOP, below, we can see a potential downside price target in the $558 area. Yes, the $558 area.
Bottom line strategy: It was a great or lucky move to take profits around $1,500. Prices have declined and the 200-day moving average line has held but that might be a temporary situation with the yield on Treasury bonds rising. I would take a wait and see attitude with SHOP for now.