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Shopify Inc. - (SHOP.TO) - October 3, 2023

Between October of 2022 and May of 2023, Shopify (SHOP.TO) climbed all the way up the rankings in the SIA S&P/TSX 60 Index Report from dead last to top spot. Since July, Shopify has been losing relative ground, dropping out of the green zone and returning to the Red Unfavored Zone for the first time since March. Yesterday Shopify finished in 32nd place, down 28 spots in the last month.

The Green Favored Zone of the SIA S&P/TSX 60 Index Report features several potential replacement candidates. On the technology side, there is Constellation Software* (CSU.TO) in Computer Software, and CGI Group (GIB.A.TO) in the Internet sector. Replacement retailers are more on the defensive side, including Dollarama* (DOL.TO) and Alimentation Couche-Tard* (ATD.B.TO). Shopify (SHOP.TO) shares appear to be at a potentially significant technical turning point. Starting in May, the shares started to encounter resistance in the $90.00-$92.50 area. In August, a downturn snapped an uptrend and established support in the $67.50 to $70.00 area.

Following a retest of $90.00 resistance, a September downswing brought the shares back down toward $70.00 support, which has held so far. At the moment, it appears that a sideways trend has emerged. A breakdown below $68.00, however, would signal the start of a new downtrend with next potential support levels down near $60.00 or $54.00.

* Shares of Constellation Software, Dollarama, and Alimentation Couche-Tard are held in portfolios managed by SIA Wealth Management.

A recovery trend in Shopify (SHOP.TO) which played out between October of 2022 and August appears to have reversed course. About a month ago, SHOP.TO ran into resistance in the $90.00 to $92.50 area, similar to its April 2022 highs. Following an initial August correction, the shares attempted a rebound last month which faltered near $90.00 again, confirming resistance near there.

October has kicked off with a bearish Double Bottom breakdown confirming distribution and the start of a new downtrend. Initial downside support appears near $67.25 based on a horizontal count, then $54.10 based on a retest of a prior column low and an uptrend line. Initial resistance on a rebound appears near $76.75 based on a 3-box reversal.

With a bearish SMAX score of 1, SHOP.TO is exhibiting weakness against the asset classes.

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