Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.
eBay (NASDAQ:EBAY) — After reporting earnings Thursday (the company beat on earnings slightly but outlook fell short of expectations), the stock tumbled almost 6% on the day, confirming the April highs as an important medium-term top. Both the longer- and shorter-term charts are now flashing warning signs.
The stock’s all-time high occurred in December 2004, at $59 and change. This month, it came within roughly $1 of those highs, which, from where I sit, counts as a retest.
The longer-term chart looking back to 2009 shows a stock that behaved well technically — moving off its lows, slowly but surely basing at higher levels, and subsequently breaking out past those resistance levels.
In early 2012, EBAY broke out past a key resistance level and has been in a stellar uptrend ever since.
Closer up on the daily chart, the stock’s marginal breakout to new 2013 highs earlier this month ended up being a classic breakout-fake out for those giddy enough to chase a stock into the stratosphere. Thursday’s post-earnings breakaway gap lower confirmed the April top.
From here, while immediate-term oversold, EBAY likely will be steering toward its 200-day simple moving average, which, more importantly, coincides with the stock’s longer-term steep uptrend. The reaction around the $50 mark will thus be of great importance.
Given these points, I am staying away from the long side of the stock, and if anything, may be looking to play it from the short side.