Ebay (EBAY), the online auction site and PayPal parent, reported Street-matching second-quarter results yesterday, but got knocked down nearly 7% thanks to disappointing guidance.
The day’s selloff brought EBAY right back into the middle of its year-to-date trading range, which — from a multiyear perspective — doesn’t throw any negative implications into its way for the time being.
The now nearly seven-month-long trading range in eBay comes on the back of a roughly 490% rally off the 2009 lows and thus qualifies as a much-needed consolidation phase. At the same time, this cooling-off period coincides with the stock’s late-2004 highs near the $60 mark, which eventually will be a significant technical area for the stock to push past.
All in all, through the lens of the multiyear chart below, this choppy sideways range between the $50 and $58 levels has a healthy undertone.
On the daily chart of eBay, we clearly see that Thursday’s post-earnings selloff simply brought the stock from the upper end down into the middle of the aforementioned trading range.
Here, around the $52.60 (200-day simple moving average, red) and $53.70 levels (100-day SMA, blue), EBAY might find some near-term support to bounce. Beyond that, however, given Thursday’s strong so-called breakaway gap, the stock likely has more work to do on the downside.
A first and logical level to look for in this price discovery trip is the bottom end of the range, near $50, which from Thursday’s close is another 4.5%-5% lower. Further speaking for more downside in the stock is Thursday’s volume of a little more than 43 million shares traded — a massive spike relative to the average of around 14 million shares.
In other words, Thursday’s downside reversal in eBay spooked more than a few investors, which could lead to more of them following suit.