Shopify Stock Falls Support Levels
Shopify Inc. Shares of (SHOP) fell more than 5% on Wednesday towards key support levels at the bottom of its price channel. With tech stocks under pressure, the move was not driven by any particular fundamental development, but rather by traders ‘ move to reduce positions in potentially overvalued or overextended stocks in high sectors.
KeyBanc sees a buying opportunity after the pullback. The analyst notes that the 55 largest software as a service (SaaS) stocks had experienced an incredible run until the end of the third quarter, but the group has fallen 11% this month and 21% from their highs on average. Some of these companies remain fundamentally sound with strong growth rates projected through 2020. Shopify made the analyst list of eight high-quality SaaS apps that investors should consider, along with Salesforce.com, Inc. (CRM), Twilio Inc. (TWLO), Wix.com Ltd. (WIX), Zendesk, Inc. (ZEN), BlackLine, Inc. (BL), Avalara, Inc. Open system. Open system. (SEE ALSO: Top 10 Hidden Factors Affecting software actions.)
From a technical standpoint, Shopify shares broke off S1 support and the 200-day moving average at around.140.75 and briefly touched the lower end of its price channel at around alrededor 127.00. The Relative Strength Index (RSI) reached oversold levels of 30.24, but the Moving Average Convergence Divergence (MACD) remains in a strong bearish downtrend. These indicators suggest that the stock could see some near-term consolidation above trend line support levels.
Traders should be on the lookout for a rebound from trend line support to re-test S1 support and the 200-day moving average if the market shows signs of recovery. If the market continues to move down, traders should be on the lookout for a breakdown of the support from the S2 support trend line around baja 116.32 down. Short-term consolidation appears to be the most likely scenario given the oversold nature of stocks at the technical level.