In this report we analyze: Fiverr, CrowdStrike, Shopify, DocuSign, Zoom, Nvidia

Please note the glossary of terms and techniques here and herehere and here

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Positions we Closed Last Week

Fiverr (FVRR)

Summary

• We logged a 17% gain in FVRR last week, after buying the move off the prior breakout around $125.
• FVRR has a completed 5 wave pattern, and is finding resistance in a very concentrated zone of resistance around $176-$181.
• We also got 3 sell signals at this area, causing us to log the gain and step out of the way for now.
• We will look to re-enter when the risk in FVRR subsides.

Last week we closed our position in FVRR, logging a 17% gain in less than 2 weeks. Fiverr had a solid breakout in the $125 region, which continued into the mid $140s region, where we initiated our position. The price gave us no indication of weakness until it approached the $176-$181 region.

As a momentum position, we are looking to sell into strength, while at the same time protecting our hard earned gains. Fiverr’s inability to break through the heavy concentration of important price clusters (shown in the chart) was one reason that we looked to take gains at this price. This was further confirmed by 3 sell signals (also listed on the chart), all of which are signaling buying exhaustion and weakening momentum.

If FVRR does correct at this region, we don’t expect a deep correction due to its positioning in the new COVID economy, as well as its relative strength. The areas we will look to potentially re-enter, assuming we get a buy signal, will be at $162 or $151. If we get a clear break below $151, it’s a signal that a deeper correction could be unfolding.

On the other hand, if FVRR can break above the $181 level on elevated volume, we will consider that a breakout, and look to re-enter this position.

 

CrowdStrike (CRWD)

Summary

• CrowdStrike is forming a classic technical pattern known as a double top (In Elliott Wave this is simply an extended B wave).
• The price structure of this rally supports the double top scenario, as of now.
• A break below $141 will confirm this scenario, which will put us in the final leg of this correction.
• A break above $154-$155 will support the correction being over, and we will likely take that position in our momentum portfolio.

Due to the number of warnings we were seeing in various positions we cover (some of which are outlined below), we decided to raise our stop to the breakeven price in CRWD in an attempt to protect our portfolio from incurring a loss.

Internally, I highlighted on the right of the chart the 161.8% extension of the 1st wave. More times than not, this is the spot where the 3rd wave in a standard 5 wave pattern will end, leading to the 4th wave drawdown. This is exactly where CRWD’s recent drawdown began, putting us in the 4th wave correction.

One reason I am not convinced the 4th wave is over is based on how shallow and quick the 2nd wave was (in blue). If the 2nd wave is quick and shallow, we tend to see the 4th wave be complex and long. In short, the 4th wave, so far, is too simple and sharp to likely be complete.

The second reason I am cautious is the structure of the recent uptrend from the $115 low.

It is hard to count this structure as anything but a corrective B wave within an ongoing correction. For the reasons above, we decided to step aside, and wait for the risks developing to work themselves out.

We are agnostic, and hold no opinion on what should happen. We simply analyze price action to give us increased probabilities to profit and manage risk. So, if CRWD does breakout to new highs, we will not hesitate to re-load our position for the next leg up.

To keep things simple, if the price breaks below the $141 region, it will help confirm that the final leg in the 4th wave is active, and the most common 4th wave targets, for CRWD, are either the $120 region or the $102 region. 

However, if CRWD can break above the $154 region, it will signal that the 4th wave is likely over, at which point we will re-assess getting back into this stock.

Potential Setups Going Forward

Shopify (SHOP)

Summary

• Shopify is struggling to breakout of the $1100-$1110 price region.
• Like CrowdStrike, there is a potential that the uptrend from the recent low is a B wave, forming what appears to be a triple top pattern.
• If price breaks below $950, it will help confirm this scenario, at which point we will track the downtrend, looking for a reasonable place to add to our position.
• However, if SHOP break above the $1110 region with force, it will be a nice setup for a continuation of this rally.

Shopify has been chopping around in a relatively tight range for about 4 months. Three times the price has attempt to breakout of the $1110 region – twice, so far, it has failed. We are at the same resistance today, and the internal indicators, along with the price structure are suggesting another potential fail at this crucial region.

The CCI is showing a significant divergence as it is decreasing while price is increasing. Also, the MACD is trending down and just crossed over, suggesting a momentum trend change is likely, at least in the short-term.

As long as the $950 region holds, this could be just a brief dip before we get a clean breakout above $1110. However, below $950 will help confirm that, at minimum, a retest of the recent low will be likely.

Docusign (DOCU)

Summary

• After an extended rally, DocuSign corrected ~35%.
• We grabbed shares of DocuSign at the $188 region, which was about 2% short of our target at $185.
• The $185 region was the shallow target for the 4th wave decline we outlined; however, the bounce off this low appears to be corrective, making the probability of a new low a scenario that we are now taking into account.
• As long as DOCU holds above the $218 support, this scenario will be unlikely. Below $218, and the probability of a new low increases.

We patiently waited to enter DocuSign while it was in its extended 3rd wave rally. Once we saw key supports break, we targeted the $185 region as an area of interest. We ended up buying at $204 and again at $188.

Since then, DOCU seems to be in a new uptrend, and destined for all new highs. However, like many other stocks we have tracked, this uptrend appears to be corrective, and could simply just be a B wave within an A,B,C correction, where the C wave will have us, at minimum, retest the $188 low.

If price breaks below $218, this scenario will become a higher probability, at which point we will open up our targets for more shares at a lower price. On the other hand, if price holds this level and breaks above the $265 region, it will support that the bottom is likely in, and new highs will be in our near future.

Zoom (ZM)

Summary

• Zoom’s large degree 3rd wave (in blue), has extended to regions that is rare to see.
• Of course, we can see further extensions, but the upside before we see a 4th wave drawdown is limited.
• Furthermore, the internal indicators are suggesting that the recent breakout to new highs is not being supported by either smart money, or strong momentum at the moment.

Last Friday on the forum, we warned our readers that Zoom below the $502 resistance was risky. After Ark Investment Management announced their first entry into Zoom, which was followed by a rush of buyers to push prices to all new highs.

Why we are skeptical of this breakout is for a few reasons: For one, in my history of studying price structures amongst various asset classes, I can’t remember the last time I saw a stock’s 3rd wave extend as far as Zoom’s current has. For example, the internal structure of Zoom’s 3rd wave is in red on the chart, and the 5th wave is currently at the 1000% extension of the first wave. Keep in mind, that we typically see the 5th wave terminate at the 200% extension.

Furthermore, for the first time in Zoom’s epic uptrend, we are seeing smart money not supporting a new high. This is evidenced by the Accumulation/Distribution line, which implies smart money flow within a stock. More times than not, this indicator will lead price, and the fact that it is not making new highs with the price is a warning.

Furthermore, the momentum indicators are showing signs of a slowdown under the hood. The MACD is not making a new high with price, which is a very common pattern we see towards the end of a move. Also, the RSI is clearly diverging, as well, suggesting that this move up is not being supported with an increase in buying momentum.

I would never bet against Zoom. In fact, it is our largest holding for a reason. At some point, momentum shifts even in the best stocks and allows for a healthy correction. We think this could be the case in the coming weeks and we will look to add to our position.

Nvidia (NVDA)

Summary

• The weekly chart that we have discussed for several months is continuing to deteriorate.
• Nvidia appears to be forming a double top, like several other stocks we are tracking.
• If it can break to new highs and hold, we can likely see a continued extension of the uptrend.
• We placed a stop on our most recent tranche ONLY – $541.5 with a stop at $537.9 (closing price).
• Based on the fundamental story with AI, we are comfortable withstanding any volatility with the remainder of our position.

We believe the long-term outlook of Nvidia is bright. However, the intermediate to short term outlook could have some bumps, which is healthy and normal.

The price action and signals I’m seeing warrant caution. That being said, Nvidia has broken out of two bases lately, which is usually bullish, and we took one of them around $540. We will be placing a stop on that tranche ONLY. The stop will be a close below the 20-day EMA ($537.90), which has held it up in this rally predominantly.

The chart attached is showing the weekly trend. I’ve been tracking the divergences with the MFI and CCI for months, which is present in my past market reports. These weekly divergences can last for months to even a year-plus before we see a correction, which is why I continued to play the breakouts with Nvidia.

Also, the bigger the time frame, the more significant the pattern is. This is why I always start my analysis with the weekly chart. The long-term trend in Nvidia is up, but the warnings are also getting stronger as well. They warrant caution and should be watched, but until you start seeing multiple timeframes lining up (monthly, weekly, daily, hourly), I find it better to stay in the trend even with the warnings.

Furthermore, I’m starting to see exhaustion in Nvidia on the daily chart, as well. The same overbought conditions and divergences are finally starting to develop. Because of this, I’m being cautious until Nvidia can break out to new highs.

As long as we can hold $520, I believe we can see new highs soon. However, below $520, and it opens the door to the pullback scenario outlined in the above chart. This is where we complete the final leg of the large degree 4th wave correction, which as of now, has standard targets between $415-$395. This will set us up for the final move in the decade-long 5-wave pattern, which should be a fun a ride and also line up well with the AI trend.