Downtrend in Shopify?
Shopify has struggled since late 2021 and now some traders may expect another push to the downside.
The first pattern on today’s chart is the pair of high-volume bearish gaps after quarterly results on February 13 and May 8. Both drops came despite better-than-expected earnings, which may suggest the e-commerce stock is a distribution phase.
Second, SHOP rebounded from the last selloff but stalled at the preceding low around $68. (Also notice how the first drop occurred at a key low from late 2020.)
Have old support zones become new resistance areas?
Third, prices are reversing at the falling 50-day simple moving average (SMA).
Fourth, the 50-day SMA had a “death cross” below the 200-day SMA earlier this month. That may reflect a bearish longer-term trend.
Stochastics are additionally starting to dip from an overbought condition.
Finally, TradeStation data shows that SHOP is a highly active underlier in the options market, averaging about 110,000 contracts per day in the last month. Traders looking for downside in the next few weeks may consider a strategy such as the July 60-July 55 put spread. It’s quoted for less than $0.75 and could potentially widen to $5 if SHOP falls slightly below its recent low.
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Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at https://www.TradeStation.com/DisclosureOptions. Before trading any asset class, customers must read the relevant risk disclosure statements on https://www.TradeStation.com/Important-Information/. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit [url =tradestation.com/DisclosureTSCompanies] TradeStation.com/DisclosureTSCompanies for further important information explaining what this means.
The first pattern on today’s chart is the pair of high-volume bearish gaps after quarterly results on February 13 and May 8. Both drops came despite better-than-expected earnings, which may suggest the e-commerce stock is a distribution phase.
Second, SHOP rebounded from the last selloff but stalled at the preceding low around $68. (Also notice how the first drop occurred at a key low from late 2020.)
Have old support zones become new resistance areas?
Third, prices are reversing at the falling 50-day simple moving average (SMA).
Fourth, the 50-day SMA had a “death cross” below the 200-day SMA earlier this month. That may reflect a bearish longer-term trend.
Stochastics are additionally starting to dip from an overbought condition.
Finally, TradeStation data shows that SHOP is a highly active underlier in the options market, averaging about 110,000 contracts per day in the last month. Traders looking for downside in the next few weeks may consider a strategy such as the July 60-July 55 put spread. It’s quoted for less than $0.75 and could potentially widen to $5 if SHOP falls slightly below its recent low.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options and futures. See our Overview for more.
Margin trading involves risks, and it is important that you fully understand those risks before trading on margin. The Margin Disclosure Statement outlines many of those risks, including that you can lose more funds than you deposit in your margin account; your brokerage firm can force the sale of securities in your account; your brokerage firm can sell your securities without contacting you; and you are not entitled to an extension of time on a margin call. Review the Margin Disclosure Statement at https://www.TradeStation.com/DisclosureMargin.
Options trading is not suitable for all investors. Your TradeStation Securities' account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See https://www.TradeStation.com/DisclosureOptions. Visit https://www.TradeStation.com/Pricing for full details on the costs and fees associated with options.
Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at https://www.TradeStation.com/DisclosureOptions. Before trading any asset class, customers must read the relevant risk disclosure statements on https://www.TradeStation.com/Important-Information/. System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors.
Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges.
TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit [url =tradestation.com/DisclosureTSCompanies] TradeStation.com/DisclosureTSCompanies for further important information explaining what this means.
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