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.