PayPal Holdings Inc (NASDAQ:PYPL) shares soared to a new all-time high Wednesday amid widespread buying in the tech sector. Shares closed yesterday at $61.77, which means PYPL stock has now tacked on 56% to its value in 2017 alone.
A banner year? You better believe it.
The record-smashing feat deserves some commentary, and thus makes PayPal today’s darling to fawn over.
Tech Bulls Smack Back
A fist fight broke out on Wall Street this month as numerous bears decided to crash the party. As is often the case, the damage was meted out disproportionately. While large caps remained largely above the fray, small caps were in the thick of it. The Russell 2000’s 7% drubbing stands in stark contrast to the relatively unscathed 2.8% dip suffered by the S&P 500.
On the sector front, technology gave as much as it got in the fracas, holding its own. Especially this week.
Yesterday, the tech-heavy index led the fight by rallying 1.18%. The pop in the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) effectively doubled that of the S&P and Russell. That’s some outperformance.
To be fair, the strength didn’t unexpectedly arise from the ether. Tuesday’s bullish engulfing candle (mentioned in yesterday’s Beat the Bell) signaled that buyers were on the move. They obviously pressed their advantage, delivering a trendline breakout on modest volume. The next stop should be resistance at $146, which will likely act as a magnet in the coming trading sessions.
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Why all the talk of tech? Well, because PYPL stock calls the Nasdaq home. And as a result, it carries a strong correlation to QQQ.
If Wednesday’s launch was the beginning of a comeback in tech-land, then that can only bode well for bullish positions in PayPal stock.
PayPal Stock Charts
With the tech sector’s posture now updated, we can analyze PYPL with renewed perspective. We begin, as usual, with the weekly time frame.
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Ever since breaking out of its post-IPO base earlier this year, the stock has been on its best behavior. Down weeks have been a rarity due to the urgent buying beneath the surface. And it’s not like the ascent has been driven by fluff.
The past two earnings announcements delivered sufficient positive news to justify the price rise and provided reasons for further increases. Yesterday’s jump carried PayPal stock above its five-week base marking yet another in a long line of buyable breakouts.
And the daily time frame? Well, there’s nothing not to like there, either.
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As with all stocks perched at record highs, PYPL stock sits above all major moving averages. I find it particularly instructive that the 20-day moving average provided support for the past two weeks. Bears tried multiple times to take the stock below this oft-watched smoothing mechanism, but buyers weren’t having it. The continual gobbling up of shares on each retest both confirmed and reinforced the underlying bid beneath the surface.
And then resistance finally gave way.
Admittedly, I would have preferred more volume accompanying yesterday’s pop, but perhaps that’s too much to ask in a sleepy August market. Regardless, the stock rallied all day and closed at the top of the range.
Make PYPL Stock Pay You
If you think the record highs will bring all the buyers to the yard, consider grabbing call options to capitalize on further upside. Buy the Oct $60 call for $3.30. Your risk is limited to the initial cost and will be forfeited if the stock sits below $60 at expiration.
More conservative traders seeking a higher-probability bet could instead sell the Oct $57.50/$52.50 bull put spread for 58 cents. You will capture the max reward of 58 cents as long as PYPL remains above $57.50. The max risk is $4.42.
As of this writing, Tyler Craig held bullish positions in PYPL. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
