Investors on Thursday are hitting Shopify (SHOP) stock hard.
The shares at one point were down more than 18%, setting a 52-week low, after the retail-platform provider reported earnings before the open.
At its low, the stock was off 78% from the all-time high set in November.
It's been a painful six months for Shopify. The company delivered a solid but still disappointing quarter. Earnings, revenue and gross merchandise value all missed Wall Street estimates.
But that’s also not surprising in one regard. Shopify stock has been out of favor lately, as have almost all growth stocks. Further, Amazon (AMZN) disappointed investors with its results last week. eBay (EBAY) did so as well this morning with its outlook.
What's clear is that investors see value in Shopify stock. What’s unclear is when that value will be so apparent that it forces investors to go long. For now, the stock is trapped in a brutal downtrend.
Trading Shopify Stock
Chart courtesy of TrendSpider.com
In January, $780 was support, but that failed in February and became resistance in March. That’s what a bear market looks like: Each rally is an opportunity to sell and prior support turns into current resistance.
We saw the same type of action around the $500 area. It went from support in March to failure in April to resistance in May.
From here, the situation doesn’t look great. Shopify stock is now failing to hold the all-time VWAP measure (anchored back to its first week of trading) and struggling to hold $400.
There is a bit of bullish divergence on the RSI, but the bulls need more than that if they’re stepping in front of a high-speed train. Specifically, Shopify stock needs to reclaim the prior low around $413.
That would give the bulls a low to measure against (currently near $395), and perhaps a bounce could be underway. The stock is still in a downtrend, but a bounce could put the $450 to $460 area in play, followed by $500.
On the downside, I don’t want to be the one to say $275 to $300 could be in the cards, but that’s where the next significant support zone looks to be. The top end of that zone, near $305, is where the covid-19 lows come into play.
It’s hard to fathom that the stock could fall that far. But here we are, down almost 80% from the all-time high just six months ago. You never know.
