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Shopify Inc. - (SHOP.TO) - March 7, 2024

SIA Charts’ Relative Strength rankings not only help investors to identify which stocks in a universe are outperforming and underperforming against their peers, but also when relative performance trends are changing.

Shopify (SHOP.TO), has been on a relative strength roller coaster ride lately. A year ago, the shares climbed from the red zone to the green zone in the SIA S&P/TSX 60 Index report, then fell back into the red zone late last summer, and soared back up into the green zone in November. In the last few weeks, relative strength has fallen off again, and SHOP.TO has dropped back out of the green zone and into the Yellow Neutral Zone. Over the last month, Shopify has dropped 24 spots to 25th position having declined 9.0% in comparison with a 1.65% gain for the S&P/TSX Composite Index over that period. Recent trading suggests that a long-term uptrend in Shopify (SHOP.TO) shares which started back in late 2022, and a short-term upleg that started with a breakaway gap back in November, has peaked and that the shares have come under distribution.

Look at the circled area in particular. In late January, the shares pulled back in what looks like a shakedown to flush out stops, then exploded upward to new all-time highs near $125.00 in what appears to be a buying climax. The shares then staged a breakaway gap downward following an earnings report, took out their 10-day moving average and remained below it, snapped an uptrend line, and have started to establish a downtrend of lower highs.

The shares have dipped below the $100.00 round number intraday and a close below that level would confirm the start of a new downtrend. Should that occur, next potential support may emerge near $90.00, a previous resistance level, or a long-term trend support line closer to $75.00. Initial resistance on a bounce appears near $105.00.

Shopify (SHOP.TO) shares have been under accumulation since the October 2022 bear market bottom, staging significant rallies in the spring and fall of last year and breaking out of a previous downtrend. Recent trading, however, suggests that a correction is underway.

Since peaking just short of $125.00 last month, SHOP.TO shares have been dropping back, completing bullish Double Bottom and Spread Double Bottom breakdowns to signal the start of a new downswing and falling back toward the $100.00 round number.

Initial support appears at a December correction low near $94.20. A failure there would signal the start of a deeper downtrend with next potential support at previous breakout points near $90.55 and then $85.30. Initial resistance on a bounce appears near $108.20 based on a 3-box reversal.

With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 5 out of 10, SHOP.TO is exhibiting short-term weakness against the asset classes.

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