ContextLogic Busts Up Through Bull Flag: What's Next?

ContextLogic Inc WISH has been trending on Twitter and in Reddit communities for weeks. It has caught the eye of retail investors not only due to its underlying statistics but many feel it is very undervalued.

ContextLogic, a San Fransisco-based e-commerce platform, has a float of 338.77 million shares and a total of 97.79% of its float is held by institutions and insiders. The stock also has 15.75% of its shares held short.

Social media users who follow ContextLogic believe the stock should trade higher on its fundamentals alone. For full-year 2020, the company reported revenue of $2.5 billion, a 34% increase year-over-year and said it had 107 million monthly active users representing 19% growth year-over-year.

ContextLogic has 550,000 partner merchants and its revenues come from charging the merchants a commission to sell products on its site.

When ContextLogic went public on Dec. 16, 2020 its stock debuted at $22.82 and shot up 43% over the following weeks to a Jan. 28 all-time high of $32.85.

The stock then declined 77% to an all-time low of $7.52 on June 7 before reversing north.

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The ContextLogic Chart: ContextLogic broke up bullish from a triangle on June 18. The stock had been consolidating an almost 100% move off its all-time low that took place across only two trading days on June 8 and 9.

After breaking up from the triangle ContextLogic advanced 31% between June 18 and 22 to $14.41 before entering another period of consolidation.

In the consolidation that took place between June 22 and Thursday, ContextLogic’s stock set up a bull flag pattern on the four-hour and daily chart with the flag being made between June 18 and 22 and the flag over the three days that followed.

On Thursday, toward the end of the trading day, a large volume entered ContextLogic’s stock and it broke up bullishly from the flag.

ContextLogic is trading above the eight-day and 21-day exponential moving averages (EMAs) and the eight-day EMA is trending above the 21-day EMA, both of which are bullish indicators.

On Thursday ContextLogic’s stock dipped down and tested support of the eight-day EMA and it held.

Bulls want to see ContextLogic’s stock hold above the top downward sloping line of the flag formation and for big bullish volume to push the stock up toward resistance at the $15 mark. If ContextLogic can regain that level of support it has room to move to $17.66.

Bears want ContextLogic’s stock to drop back into the flag and for the top of the channel to continue to act as resistance, and push the stock down, until the pattern is no longer valid. If the stock continued to trade down in the channel it could eventually lose support at $11.99.

WISH Price Action: ContextLogic was trading down 1.63% at $14.16 on Friday at publication.