Shopify (SHOP) stock is having one of its best sessions in quite some time, up more than 17% so far on Thursday.
The move comes after the company reported better-than-expected third-quarter earnings before the open.
Revenue of $1.37 billion grew 22.3% year over and narrowly topped analysts’ estimates by $30 million. A loss of 2 cents a share was better than the 5-cent loss that analysts were expecting.
Shopify stock was a leader amid the growth stock group and it has paid the price dearly for that classification.
The bear market of 2022 has been brutal toward growth stocks and that’s reflected in Shopify’s 86.6% peak-to-trough decline.
Bulls are hoping that with shares bouncing nicely from this month’s low coupled with the post-earnings rally today, that we’ve seen the bottom.
Trading Shopify Stock on Earnings
Chart courtesy of TrendSpider.com
Coming into earnings, Shopify stock was looking questionable. That’s as shares were struggling with $30 and the 50-day moving average.
You may notice that $30 was prior support while $40 was resistance. However, once $30 failed as support, it became resistance — which is a common development in a bearish trend.
In any case, Thursday’s rally thrusts the stock back above $30. It’s even reclaiming the 21-week moving average as we speak (which is loosely translated to the 100-day moving average).
Now we’re in a difficult area, though. At least, difficult in terms of determining the next path for Shopify stock.
On the one hand, now that the stock is back over $30 and the 50-day moving average, there’s not much in the way to stop a run to the $40 to $42 zone. Even higher is the 200-day moving average in the upper $40s.
However, there is one potential hurdle to be aware of.
If we look at the recent range from the October low back up to the August high, we have the 50% to 61.8% retracement zone between $34.50 and $37, and you can see the stock starting to stall there now.
Above $34.50 opens the door to $37. Above that could put another $3 to $5 a share in play on the upside.
However, if this area rejects Shopify stock and it fails to hold the 21-week moving average, we see that $30 and the 10-day and 50-day moving averages act as support.
