Online auction site and PayPal parent eBay (EBAY) made the news yesterday as activist investor Carl Icahn issued a new open letter to the EBAY stock holders, in which he reiterated his previous frustrations with the company’s management.
Icahn blamed eBay’s board of directors for severe corporate governance failures, and in specific, also criticized board members including Marc Andreessen and Scott Cook as being more focused on their own pockets than those of EBAY stock holders. Icahn blamed eBay for selling a controlling stake in Skype to Andreessen and Silver Lake, who turned around and just 18 months later sold Skype to Microsoft (MSFT) for a massive $4 billion gain. Icahn says this gain should have been distributed to the shareholders.
In response to Icahn’s letter, eBay quickly turned around, calling his claims dead wrong.
For my purposes, all of this simply means that EBAY stock is now “in play” and ready for the active trader/investor to look for opportunities.
EBAY stock improved by more than 2% Wednesday, breaking past an important technical near-term resistance line and working toward a major long-term resistance point on the weekly charts.
The chart below shows that after EBAY stock reached an all-time high in late 2004/early 2005, it began a long and painful downturn that didn’t end until the flush in the broader stock market in early 2009. From there, EBAY went on an amazing journey back up, which in March of last year brought it back to its 2005 all-time high levels. Instead of breaking to new highs, however, EBAY stock began a choppy sideways consolidation phase, which — in this time frame, at least — is still going on.
On the daily chart below, however, I am seeing signs that EBAY stock might now be ready to attack and overcome the 2005 highs around the $59 area sooner rather than later.
After finding good support in late November, EBAY has worked higher in an orderly fashion and now sits well above its 50-, 100- and 200-day simple moving averages. This Monday, the stock broke past its black downtrend line that dates back to early 2013, and on Wednesday, EBAY saw follow-through buying.
Tactically speaking, EBAY now looks ready to head into the low $60s in coming months, although some more backing and filling cannot be ruled out as the punches between Icahn and EBAY fly back and forth.
Last support for any consolidation for the stock is its 20-day moving average, currently near $53.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.