Shopify shares rise after earnings and only one obstacle stands in the way of its return to $40 or more.
Shopify (STORE) – Get Subordinate Class A Report from Shopify Inc. the stock is having one of its best sessions in a while, up more than 17% so far on Thursday.
The move comes after the company reported better-than-expected third-quarter results ahead of the opening.
Revenue of $1.37 billion was up 22.3% on the year and narrowly beat analysts’ estimates of $30 million. A loss of 2 cents per share was better than the 5 cent loss analysts were expecting.
Shopify stock was a leader among the group of growth stocks and it paid dearly for this classification.
The 2022 bear market was brutal on growth stocks and that’s reflected in Shopify’s 86.6% peak-to-trough decline.
Bulls are hoping that with stocks rebounding nicely from this month’s low coupled with today’s post-earnings rally, we have seen bottom.
Trading Shopify shares on profits
Going into earnings, Shopify’s stock looked questionable. That’s when stocks struggled with $30 and the 50-day moving average.
You may notice that $30 was previous support while $40 was resistance. However, once $30 failed as support, it became resistance – which is a common development in a downtrend.
Either way, Thursday’s rally brings the stock back above $30. It even retrieves the 21-week moving average as we speak (which loosely translates to a 100-day moving average).
Now we’re in a tough spot, though. At least, difficult in terms of determining the next path for Shopify stock.
For one thing, now that the stock is back above $30 and the 50-day moving average, there is little to stop a run towards the $40-$42 area. . The 200-day moving average is even higher in the upper $40s.
However, there is a potential obstacle to be aware of.
If we look at the recent range from the October low to the August high, we have the 50%-61.8% retracement area between $34.50 and $37, and you can see that the action is starting to stagnate there now.
Above $34.50 opens the door to $37. Above that could put an additional $3-5 per share in play on the upside.
However, if this area rejects Shopify stock and fails to hold the 21 week moving average, we see $30 and the 10 and 50 day moving averages acting as support.