Shares of e-commerce platform Shopify (SHOP) are trading higher Monday on the heels of a busy Black Friday for their retailers.
In our last review of SHOP on August 11 we wrote that "SHOP should be able to extend its gains on the upside, but keep a close trailing stop as I am nervous staying long for the broader market averages."
Let's check out the charts and indicators again.
In the daily bar chart of SHOP, below, we can see that the shares receded from the middle of August and made a new low in October. Prices have firmed up from its October nadir with SHOP approaching the underside of the declining 200-day moving average line. Trading volume has declined in the month of November as prices have advanced -- this is not a strong and durable advance. A strong advance is when trading increases in the direction of the trend.
The On-Balance-Volume (OBV) line shows a modest increase the past two months. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but pointed lower.
In the weekly Japanese candlestick chart of SHOP, below, we can see a mixed picture. The shares are in a longer-term decline as they trade below the declining 40-week moving average line. If the 40-week line was bottoming I would be more encouraged.
Trading volume has been heavy since April suggesting a shift in ownership unfortunately the weekly OBV line has been weak into October which tells a bearish story. The MACD oscillator has been improving but still remains well below the zero line.
In the daily Point and Figure chart of SHOP, below, we can see a potential upside price target in the $60. A trade at $42 is needed to refresh the uptrend and a trade at $46 is needed for a real breakout. On the downside a trade at $34 will start to weaken the picture.
In this weekly Point and Figure chart of SHOP, below, a price target in the $75 area is projected.
Bottom-line strategy: Markets are forward looking, not backward looking. SHOP is up on Black Friday news but can we count on continued sales going ahead? From my perspective the charts and indicators of SHOP are not strong enough to expect further gains at this point in time.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
