Shopify: Unusustainable Parabolic Move Analysis 1D, 1W (May 25)

X Force Global Analysis:


Shopify, a multinational e-commerce platform located in Canada, has shown extremely strong bullish momentum for the past few weeks. In this analysis, we take a purely technical approach, and explore the bearish signs emerging from Shopify's intense bull run.

Analysis

- On the left hand side, we have the daily chart for Shopify (SHOP)
- The first thing we notice is the number of gaps that have been formed on the daily chart
- While Shopify has been on a bull run, it has been trading in an extremely choppy trend, forming gaps from $772 down to $367
- This excludes the gaps that have been filled by the candle's wick
- Counting Elliott Waves, we see a textbook impulse wave count (12345)
- While we are currently completing wave 5, it is hard to confirm whether there is more upside, or whether we have topped out, as this is a record high
- The Relative Strength Index (RSI) is extremely overbought on the daily
- While the Moving Average Convergence Divergence (MACD) has negated its death cross, the bullish histograms do not demonstrate much momentum either
- The envelope indicator demonstrates that we are overextended on the daily, potentially looking for at least a pullback
- On the right hand side, we have Shopify's weekly chart
- The weekly chart demonstrates a clear parabolic trend
- We can spot an extended bearish divergence, in which we see higher highs on the price, and lower highs on the RSI
- It's also important to note that the RSI is at overbought regions on the weekly too
- Parabolic trends are unsustainable, and even if we were to see a correction down to test the parabolic trend, that would be a 50% move down from current price levels


What We Believe

While Shopify is a stock that is sound fundamentally, technicals demonstrate clear signs of prices having been overextended and the stock being overbought.

Trade Safe.