Short Trade Idea
Enter your short position between $139.70 (the intra-day low of its last bullish candlestick) and $148.29 (yesterday’s intra-day high).
Market Index Analysis
- Atlassian (TEAM) is a member of the NASDAQ 100 Index.
- This index trades inside a bearish chart pattern with rising bearish indicators.
- The Bull Bear Power Indicator for the NASDAQ 100 is bearish with a descending trendline.
Market Sentiment Analysis
Equity markets rallied yesterday, building on Friday’s reversal, amid Federal Reserve Bank of New York President John Williams’ comments on a potential December interest rate cut. AI stocks led last week’s sell-off and reversal and are dragging equity futures lower this morning on the back of a contraction in NVIDIA. The AI bellwether is sliding after reports that Meta Platforms will spend billions to purchase chips from Google parent Alphabet’s AI chips. Investors will also receive delayed PPI and retail sales data, while bond yields remain high, flashing warning signs for equity markets amid the worrying AI bubble trend.
Atlassian Fundamental Analysis
Atlassian is a proprietary software company specializing in collaboration tools for software development and project management. It employs over 12,000 people in 14 countries and serves more than 300,000 customers across 200 countries.
So, why am I bearish on TEAM despite its 55%+ correction?
Atlassian reported revenue nearly in line with expectations, but it lowered its full-year billings guidance, hinting at concerns with its growth rates. While TEAM began to accelerate AI acceleration, I remain bearish on enterprise cloud migration. Several core operational metrics remain dismal, including negative returns on assets and equity, and its recent announcement of a $2.5 billion share repurchase program cannot stem the correction.
Atlassian Fundamental Analysis Snapshot
The price-to-earning (P/E) ratio of 37.08 makes TEAM an expensive stock. By comparison, the P/E ratio for the NASDAQ 100 is 32.83.
The average analyst price target for TEAM is $.24. While this suggests excellent upside potential, the current environment indicates a significant disconnect in achieving this target.
Atlassian Technical Analysis
Today’s TEAM Signal
Atlassian Price Chart
- The TEAM D1 chart shows price action breaking down below a horizontal resistance zone.
- It also shows price action between its descending 0.0% and 38.2% Fibonacci Retracement Fan levels, following a triple breakdown.
- The Bull Bear Power Indicator is bearish with a descending trendline.
- The average bearish trading volumes are higher than the average bullish trading volumes.
- TEAM corrected by more than the NASDAQ 100 Index did, which is a bearish confirmation.
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My Call on Atlassian
I am taking a short position in TEAM between $139.70 and $148.29. Valuations remain high, driven by overconfidence in its AI collaboration, and I see more headwinds in the short-term related to its disappointing billings guidance and debt-driven capital expenditures.
- TEAM Entry Level: Between $139.70 and 148.29
- TEAM Take Profit: Between $113.86 and 117.80
- TEAM Stop Loss: Between $152.38 and $160.10
- Risk/Reward Ratio: 2.04
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