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Shopify Inc - (SHOP.TO) - November 6, 2023

A positive earnings report and a general rebound in equities, particularly previously depressed high-beta names, propelled Shopify (SHOP.TO) to a 19.3% gain last week, including a rise of 2.4% on Friday alone.

This big two-day rally brought two months of weakening relative performance to an abrupt end as the shares jumped 33 spots in the SIA S&P/TSX 60 Index Report last week, including a move up of 7 positions on Friday to 13th place. Looking at this rocket ride by zone, SHOP.TO finished Wednesday in the red zone, finished Thursday in the yellow zone and finished Friday in the Green Favored Zone for the first time since September.

The big questions for investors now are whether this has been a relief rally/dead cat bounce, or the start of a new uptrend and what would it take to figure this out? This chart for Shopify (SHOP.TO) can be seen as potentially telling a good news/bad news story. On the positive side, the shares did stage a breakaway gap last week that retook both the 50 and 200-day moving averages on an increase in volume.

On the negative side the positive volume of Thursday and Friday (green circle) is similar to the negative volume over two days in a September selloff (red circle) suggesting that this may just be an unwinding of previous bearishness or some bargain hunting, but not necessarily a lot of new interest coming in. To signal the start of a new uptrend, the shares need to clear resistance at a downtrend line near $85.00, and then the summer peak near $92.50. Should that occur the door could be open for a run at the $100.00 round number or potentially higher.

Should this rally falter, however, initial support may appear at the 50 and 200-day averages in the $74.00 to $76.00 range, then the bottom of last week’s gap near $67.50 and the recent low near $65.50.

The technical situation for Shopify has turned around significantly in the last few days. A week ago, the shares were in a firmly established downtrend on double bottom and bearish catapult signals. Those were called off by last week’s rally and the shares are currently on a bullish Double Top signal.

Initial resistance appears at summer highs just above $90.00. It would take a close above $94.40 to clear them, complete a pending spread triple top pattern and signal the start of a new upleg. Should that occur potential upside resistance tests appear near the $100.00 round number, previous column highs near $104.00, or $110.40 based on a horizontal count.

A close below initial support near $77.25 would complete a bearish 3-box reversal and signal the start of a new downswing with potential support at a previous high near $71.40 or the recent low near $63.40.

The SMAX score for SHOP.TO has increased to 5 which remains in bearish territory and means SHOP.TO continues to exhibit weakness against the asset classes. This would turn bullish, however, with a move up to 6.

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