Two sell-side fundamental analysts cut their price targets on Shopify ( SHOP) Monday but the stock has already been weak making a new low for the move down on Friday.
In our last review of SHOP on April 18 we wrote that "In our Feb. 25 review of SHOP we hoped for a rebound back to $900. Prices got close to $800 and failed -- I consider rallies that stop short of a price target a sign of weakness. From here traders should avoid the long side of SHOP as further declines seem to be in store."
Let's check the charts again.
In the daily bar chart of SHOP, below, we can see that the shares turned lower back in November. The decline accelerated in January and has not hit bottom. SHOP is trading below the declining 50-day moving average line and below the declining 200-day line.
The trading volume has increased significantly the past four months as traders and investors have gotten the message and voted with their feet. The On-Balance-Volume (OBV) line is weak and has made a new low for the move down from November telling us that sellers of SHOP remain more aggressive sellers.
The 12-day price momentum study shows us higher lows from January telling us that the pace of the decline is slowing and creating a bullish divergence with the price action. Unfortunately, divergences are poor timing indicators.
In the weekly Japanese candlestick chart of SHOP, below, we can see a mixed picture. Prices are in a downtrend as they trade below the declining 40-week moving average line. The candles do not show us any lower shadows to tell us that traders are rejecting the lows.
The trading volume has increased into the lows and the OBV line remains pointed down. The 12-week price momentum is improving but does not show a bullish divergence.
In this daily Point and Figure chart of SHOP, below, we can see a $292 price target.
In this second Point and Figure chart of SHOP, below, we used weekly price data. Here the chart yields a $148 price objective.
Bottom-line strategy: Traders should continue to avoid the long side of SHOP. We are likely to see a better buying opportunity in the months ahead.
