EBay Inc (EBAY) is one of the few stocks that hasn’t yet taken full advantage of the wild rally on Wall Street. While eBay stock’s relative weakness is unfortunate for existing shareholders, it does present some interesting opportunities for would-be buyers moving forward.
See, the best bull runs are driven by rotation. When leading stocks have moved into the stratosphere, they pause, allowing money to move into the laggards for a bit of catch-up.
Such a dynamic may well play out for eBay in the weeks ahead. Rotation aside, EBAY is providing a much lower risk entry than its fellow tech brethren that are flashing overbought signals. And as we speak, an interesting breakout has developed in EBAY stock. Let’s dig in.
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While eBay remains well off its highs, it’s done a commendable job in stabilizing following last quarter’s swan dive post-earnings.
The past month of narrow consolidation has allowed the 20- and 50-day moving average to flatten, improving the technical posture of the stock notably. All the bulls need is a little mojo to push the stock above the $24.60 resistance zone and a squeeze will commence.
The January earnings gap created a price void which should fill in short order taking the stock toward $26.30. Coincidentally, the 200-day moving average also resides at that level making it all the more logical as the target for the coming breakout.
Place Your Bet With EBAY Calls
With volatility subdued option premiums aren’t all that expensive these days. If you’re on the lookout for a cheap way to score from the eBay stock recovery, buy call options.
Buy the June $24 call for $1.45. The max risk is limited to the initial $1.45 debit and will be lost if the EBAY stock price sits below $24 at June expiration. The max reward is unlimited, allowing unfettered participation in any upside over the next three months.
By using June options, eBay has ample time to fill the earnings gap and deliver profits aplenty. If you want more confirmation, consider waiting to buy the call until the stock has risen above the aforementioned $24.60 resistance zone.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
