U.S. equities suffered a setback on Monday as tech stocks too another round of punches to the chin. Technology’s woes continued following a Friday warning from Goldman Sachs that valuations were becoming increasingly problematic, especially among big names such as Microsoft Corporation (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL). The S&P 500 Index dipped 0.2%, the Dow Jones Industrial Average gave back 0.1% and the Nasdaq Composite dropped by 0.5%.
Heading into Tuesday, Shopify Inc (US) (NYSE:SHOP) is running into yet another headwind, Merck & Co., Inc. (NYSE:MRK) is stumbling on some disappointing trial news and Under Armour Inc (NYSE:UAA) finally looks like it’s regaining its footing.
Here’s what’s you should know heading into the Tuesday trading day.
Shopify Inc (US) (SHOP)
SHOP stock’s hot run is about to absorb a third straight day of resistance amid a downgrade from Goldman Sachs.
Analyst Jesse Hulsing has just lowered the rating on Shopify to “Neutral” from “Buy,” though the price target of $96 still represents roughly 8% upside from Monday’s closing price.
That’s because while Hulsing still believes in Shopify’s e-commerce story, he’s skeptical about the company’s increasing reliance on noncore areas of the business — and the potential for the growth in these newer products to taper off.
SHOP shares have more than doubled over the past year, led by results like its first-quarter earnings beat in early May. Shopify recorded 75% year-over-year revenue growth to $172.4 million, led by a 92% jump in merchant solutions revenue and a 60% leap in subscription services revs. An adjusted loss of 4 cents per share was far better than the Street was expecting, too, with estimates at 10 cents.
Still, Shopify is set to endure its third consecutive down day, with SHOP stock off by more than 2% in Tuesday’s premarket trade.
Merck & Co, Inc. (MRK)
Merck is bracing itself for a down day as the company made the difficult decision to halt new enrollments for a clinical drug trial.
The two late-stage studies were examining Keytruda (pembrolizumab), a multiple myeloma drug. While treatments will continue to determine why KEYNOTE-183 and KEYNOTE-185 resulted in higher death rates, the company won’t add new patients following an imbalance of deaths.
Merck has yet to disclose any reason why such an imbalance occurred — it is unclear whether or not the pharmaceutical company has determined such a cause.
Multiple myeloma is a cancer caused by malignant plasma cells that afflict the bone marrow and the immune system.
MRK shares are off a little more than 1% this morning.
Under Armour Inc (UAA)
Is UAA back?
Under Armour, which has bled out by more than 40% over the past year, is suddenly picking up a head of steam. And there’s very little in the way of fundamental drivers pushing the move, unless you want to count the headlines of UA-sponsored Stephen Curry and the Golden State Warriors making a quick run through the NBA Finals.
Instead, this run appears to be technically driven, but the move is powerful, and may have more room to run.
UAA shares recently broke through both its 20- and 50-day moving averages and is gapping up hard, with little in the way of technical resistance until the 200-day moving average at $27.61 — nearly 20% upside from current prices. There’s some smaller Fibonacci resistance around $25, where the 23.6% retracement level lies, and even that is another 8% higher from here.
Moreover, the short-term 20-day moving average, a few days removed from ducking under the medium-term 50-day MA, is crossing back above it — another small bullish signal.
The only worry here is the potential for UAA stock to become overbought. If you’ll notice, the past couple days’ action has brought the Relative Strength Index (RSI) reading above the overbought 70 level.
UAA is up marginally in Tuesday’s action, and is up about 14% in just a week’s time.
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