Don't Sweat this E-Tailer's Pullback Just Yet

The stock could soon stage a bounce

Deputy Editor
Dec 6, 2021 at 1:12 PM
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The shares of e-tailer Shopify Inc (NYSE:SHOP) are down 2.6% to trade at $1,374.38 this afternoon, and have been cooling since their Nov. 19 all-time high of $1,690.60. In fact, over the last month, Shopify stock has shed 10.2%, and just logged its second-consecutive weekly loss. There's no reason to panic just yet, however, as the equity remains up 21.3% year-to-date, and just brushed a historically bullish trendline.

Specifically, SHOP just came within one standard deviation of its 200-day moving average, after spending considerable time above this key trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar pullbacks have occurred over the past three years. One month later, the stock has moved higher 100% of the time, averaging a gain of 14.6% during that time period. From where the stock currently sits, a similar move would put it right above the $1,575 mark.

SHOP Chart Dec 6

Analyst sentiment on SHOP is mostly positive at the moment, though there's still ample room for upgrades moving forward. Of the 27 in coverage, 13 still rate the stock a tepid "hold" or worse. Shorts, meanwhile, are jumping ship at a staggering pace, with short interest down 16.7% in the most recent reporting period.

Additionally, Shopify stock's 14-day Relative Strength Index (RSI) stands at 22 -- putting it firmly in "oversold" territory. This suggests a short-term bounce could be on its way. 

 

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