Ebay’s Choppy Trading Could Continue

by Serge Berger | July 19, 2013 9:06 am

Ebay (EBAY[1]), 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.

Click to Enlarge

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.

Click to Enlarge

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.

Serge Berger is the head trader and investment strategist for The Steady Trader[2]. Sign up for his free weekly newsletter here[3].

  1. EBAY: http://studio-5.financialcontent.com/investplace/quote?Symbol=EBAY
  2. The Steady Trader: http://thesteadytrader.com/
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