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How to Craft Etsy Stock Trades After Earnings Selloff Rattles Bulls

Etsy is under pressure even after the crafts retailer beat earnings and revenue expectations. Here are the must-know levels now.

It’s not a great day for growth stocks, as Etsy  (ETSY) - Get Etsy, Inc. Report, Roku  (ROKU) - Get Roku, Inc. Class A Report and others fall hard after reporting earnings.

Granted, Roku has put together a decent rebound after a solid report, but it’s still down on the day.

For Etsy, it’s a similar observation. The stock is down “just” 7.5%, which isn’t pretty, but it’s much better than the 13.5% loss that it opened with on the day.

The company delivered a top- and bottom-line earnings beat, but analysts were looking for slightly more growth in its guidance. 

Others have pointed out that the company’s growth rate is slowing after an explosive year amid the COVID-19 outbreak.

Well, of course the growth rate is decelerating. Etsy just had a year for the ages driven by a global pandemic!

For what it’s worth, Amazon  (AMZN) - Get Amazon.com, Inc. Report stock didn’t react well after its guidance either. What now with Etsy?

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Trading Etsy Stock

Daily chart of Etsy stock.

Daily chart of Etsy stock.

Let's keep in mind: This stock topped out in March and was down about 20% from those highs coming into the print.

The question now: Is there enough reason to be long Etsy at these levels or is more downside on the way?

In early May, Etsy stock gapped down as growth stocks were nearing an end to the bear market. But $175 was resistance until late June.

This morning, we saw Etsy open near that $175 mark and rally right away. Like Roku, that was a good showing from the bulls.

Now though, it’s rallying into so many moving averages it’s hard to keep count. There’s the 10-day, 10-week, 21-day, 21-week, 50-day and 200-day moving averages all within a few dollars of each other.

The good news is if Etsy can reclaim this area, it should act as a strong support area. That would put the July high near $212 on the table, followed by a potential move to $225.

The bad news is this area could easily act as resistance, keeping the $175 area in play. A move below that mark could put the $155 level on the table, which is around where the May low comes into play.