How are you going to play the big market drop? If you’re looking at Canadian e- commerce company Lightspeed POS (Lightspeed Stock Quote, Chart, News TSX:LSPD), there could be some definite signs coming up on when to sell, says Hap Sneddon, chief portfolio manager of CastleMoore Investment.
Monday’s major tanking took a toll on stocks across the board, with tech feeling the pressure more than other sectors. The US Nasdaq lost 3.71 per cent yesterday compared to the S&P 500’s drop of 3.35 per cent and the Dow’s 3.56 per cent loss.
In Canada, the S&P/TSX Composite Index fell a more modest 1.6 per cent, which still counted as the biggest one-day loss in six months. Canadian tech was hit, too, with Shopify down five per cent, Constellation Software down two per cent and CGI Group down 1.5 per cent.
Montreal-based Lightspeed, which IPO’d last March at $16 per share and doubled over the rest of 2019, dropped 2.4 per cent to end the day at $36.41 per share.
Sneddon says investors may want to keep an eye on the stock’s 200-day moving average while at the same time cautioning against reacting too quickly to major market fluctuations.
“This is actually a name that we are interested in trying to pick up — we haven't done it yet but we started looking at it the last month or two,” said Sneddon, president of CastleMoore, who spoke to BNN Bloomberg on Monday. “One thing that's obvious when you see the stock is it has hit right to the 200-day, which is pretty important. Some people build a whole career around that 200-day. It’s around $34.78 and we're just above that slightly.”
“I would look for this one over the next couple days. If you want to know should I sell this thing tomorrow? I can't give any kind of advice on that, but what I would look for is the third day, to say, okay, how does it close that third day and that's usually sort of an indication of where people sort of get entrenched,” Sneddon said.
“[Tuesday] might shake some more people. But how does it close on that third day? That's a general rule that we look at, to stick with your position [until then],” he said.
So far, Lightspeed has impressed not only with its ambition to conquer the point-of-sale market and beyond but also with its execution — in its latest quarterly report, LSPD reported revenue growth of 61 per cent year-over-year and a 46-per-cent increase in gross margin, as the company continues to scale up and add new subscribers.
But Sneddon says the technicals give a pretty clear indication of where the stock’s support levels currently sit, with a few good touch points to signify a potential sell.
“Certainly, $34.78, if it kind of goes below that, that would say to me, yes, you should get out,” Sneddon says.