Shopify Breaks Out on Cyber Monday - Can It Hit New Highs?

Shopify began breaking out late last week and that move is continuing on Monday with strong Black Friday results. Let's look at the charts.
Publish date:

Websites powered by Shopify  (SHOP) - Get Report have had a busy couple of days, and as a result the stock has had a busy Monday.

Shares gapped up 1%, ripped higher more than 5% at one point and then pulled back. The stock remains up 4% on the day, despite the volatility. 

There was some pent up bullishness on Monday after Shopify released its black Friday sales total. The company’s platform saw sales climb to $2.4 billion, up 75% year over year and a new record for Shopify.

Of course, Monday is Cyber Monday, the day when merchants using the Shopify platform should see another strong surge in online sales.

Some will argue that Shopify makes money off its websites subscriptions, but isn’t actually selling the products generating the gaudy sales numbers. That’s true. However, its ecosystem - consisting of Shopify Pay, Shopify Credit, Shopify Shipping and other services - sure is benefiting from the surge in online sales.

While the holidays are one catalyst for the stock, the chart is another.

Trading Shopify

Daily chart of Shopify stock.

Daily chart of Shopify stock.

Shopify’s rally comes even as other e-commerce players - mainly, Amazon  (AMZN) - Get Report - aren’t doing as well on the day. For its part, Amazon is actually down about 1.5% on the day.

Amazon is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN? Learn more now.

In any regard, Shopify’s bullish price action began before Monday’s move higher. In fact, it comes about a month after the company's strong earnings report

When I look at Shopify stock, I see four things right off the bat. First, the stock broke out over channel resistance (blue line) last week. Second, in doing so, the stock also pushed above all of its major moving averages.

Additionally, Shopify stock has been range bound for months, consolidating between $875 on the downside and $1,100 on the upside. For bulls, this is very healthy price action, although it can be frustrating at times.

My last observation is the relative strength index (RSI), which is far from overbought at the moment (the RSI reading is at the top of the chart). This too bodes well for bulls and could put a test of $1,100 range resistance in play.

What I really want to see is a breakout over $1,110. This will put the current all-time highs in play near $1,150. Above that and the $1,227 and $1,278 levels could be in play. Those come into play near the 138.2% and 161.8% extensions from the November low to the October high, respectively.

On the downside, I don’t want to see Shopify stock lose $1,000, which would put it below the 10-day, 50-day and 100-day moving averages. If it does though, bulls must see it hold the backside of prior channel resistance. Below it could put $875 back in play.