The broad market is rallying in the face of a sharp jump in jobless claims.
But Shopify (SHOP) shares aren't participating in the market rise. They're down about 10%.
What do jobless claims and Shopify have to do with each other? Well, more than one may think.
With Shopify levered to e-commerce operators, the latter’s success drives the company.
Shopify's recent update suggests that as brick-and-mortar retailers are forced to close amid lockdown and shelter-in-place orders, merchants are increasingly turning to online options.
That’s one reason the Ottawa company expects revenue and adjusted operating profit for the first quarter to be in line or ahead of its prior outlook. But due to coronavirus-related uncertainty, the company is pulling its full-year outlook.
Further, management noted that momentum from 2019 carried into January and February. But that leaves investors wondering whether Shopify has now seen a dropoff in the latter part of March.
While more retailers are likely pivoting to e-commerce solutions, the economic halt may be being felt at Shopify as well.
Let’s look at the charts.
Trading Shopify Stock
The one-year daily chart above highlights just how impressive Shopify stock has been.
The shares tripled from sub-$200 in April 2019 to almost $600 by February 2020. Now they're in retreat, and long-term investors are looking for buying opportunities.
Look at the support that is failing - at least for now. Shopify still might reverse its losses and reclaim these levels within hours or days.
As of now, though, the shares are breaking below the 200-day moving average and the $350 mark. Below these marks puts the $325 area in play.
As you can see on the chart, this zone (blue box) was support for Shopify stock for four straight sessions last month.
Should Shopify shares fall to this level and find support, look for the stock to reclaim $350 on a rebound, then see how it handles the 200-day moving average.
Over both puts $400-plus back on the table, along with the 100-day moving average currently near $415.
If $325 fails as support, it could put a larger decline on the table. That may very well take SHOP stock down to the $285-to-$300 area.
From June through November, this zone was a constant buoy for Shopify. Unless the overall market comes under significant selling pressure, I would again expect this level to act as support.
That’s even as Shopify has a high valuation relative to the overall market.
The company has an incredible growth story and I don’t expect that (or the secular theme in e-commerce) to change anytime soon.