How High Can Etsy Rally After Depop Deal? The Charts Give a Hint.

Shares of Etsy are rallying toward one-month highs after its $1.63 billion purchase of Depop. How long can the rally last?
Publish date:

Etsy  (ETSY) - Get Report stock is ripping higher on Wednesday, up almost 8% on the day.

The rally comes amid a mixed day in the market, while meme stocks like AMC Entertainment  (AMC) - Get Report surge.

So what did Etsy do? It didn’t report earnings like Zoom Video  (ZM) - Get Report and it’s not a meme stock like AMC.

Instead, the company acquired Depop for $1.63 billion.

What’s Depop? It’s a Gen-Z focused resale app, and apparently investors are loving the move. Etsy stock is hitting its highest level in almost a month.

Similar to Zoom, Etsy was a pandemic favorite among investors. While it raged higher into March 2021, the stock has struggled to find upside traction.

That’s as a bear market has decimated growth stocks and as Etsy investors worry about waning growth now that the world is returning to a more normal state.

Trading Etsy Stock

Daily chart of Etsy stock.

Daily chart of Etsy stock.

After topping out in March, Etsy has traded around a menacing downtrend measure (blue line). I’m not a huge fan of randomly drawn lines on one’s chart, but it’s hard to deny the stock’s responsiveness and gravitation to this measure.

With Wednesday’s rally, we’re seeing a big breakout over that downtrend measure, which has been acting as resistance for the past few weeks.

The shares are also breaking out over the 10-day, 21-day and 200-day moving averages as well. From here, I would love to see these moving averages flip from resistance to support.

In fact, that’s a necessary development for the bulls if they want to see Etsy garner any form of sustained upside action.

Speaking of the upside, let’s keep an eye on the $181.50 level, which is the gap-fill mark from early May. Back above that mark and the 50-day moving average is in play, followed by the 21-week moving average.

The latter currently comes into play around $200. Should Etsy push through this level and clear $200, bulls may consider a longer-term target of $225 for the stock. That area has been stout resistance so far this year.

On the downside, a break of the 200-day moving average could put the stock’s downtrend measure back in play. Below the 50-week moving average puts a retest of the $155 level on the table.