EBAY Stock: Up and Away
eBay Inc (NASDAQ:EBAY) stock represents a name that some argue was the birthplace of e-commerce. My first venture into the e-commerce space was with eBay. I cannot recall exactly what I purchased from eBay, but the ecommerce giant has become a staple in my life, both as a consumer and a merchant.
I was first drawn to eBay because it provides a landscape in which I can buy and sell items on the Internet with some prevailing guarantee. If I am unhappy with my purchase or sale, I can resolve the issue with their help. The added bonus of using Paypal Holdings Inc (NASDAQ:PYPL) to make transactions is what originally sealed the deal for me. I have been a longtime user of the service and I will continue to be a patron.
Besides my long-enduring emotional relationship with eBay Inc., I have chosen to focus on the company because the charts have piqued my interest. EBAY stock has been a lifeless trade for many years, as a sideways trading range dominated. The current surge higher in its share price has dynamically changed that picture.
The following chart illustrates the current bullish price action.
Chart Courtesy of StockCharts.com
There are two key standouts on this chart. The first is the golden cross, and the second is the breakaway gap.
On July 21, EBAY stock gapped higher after the company announced better-than-expected earnings. Gaps on a chart pattern are significant, as traders use them as signals. The gap on this chart is a breakaway gap. The key feature of these gaps is that breakaway gaps rarely get filled, and almost always signal that a new trend has started.
In August, EBAY stock generated a golden cross. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. Traders use this signal to confirm that a bull market is on the horizon. It is wise to trade in the direction of this signal. A trader’s position should either be long or neutral in the face of this signal.
These two signals are not the only bullish aspects of this situation, as the following EBAY stock chart illustrates.
Chart Courtesy of StockCharts.com
The patterns in price also confirm the bullish trading signals.
An uptrend line is created by connecting the troughs. This trend had supported the share price prior to the earnings announcement that sent shares soaring. Because this line is clear and defined, a strategy can be produced around it. A trader can purchase EBAY stock as support is hit, or as an exit strategy if the share price falls below this trend line. Trend lines are a trader’s most valuable tool.
The pattern of trade above the trend line is also consistent with the bullish premise. Impulse waves, highlighted in green, are followed by consolidation waves, highlighted in pink. This pattern in a bull market is very constructive, as gains are consolidated before shares enter the next impulse wave. As a possible midpoint consolidation, a price objective could be $39.00.
With that target in mind, I would keep a close eye on the trend line. A break of trend or a meeting of that target would be a reason to exit the trade.
The Bottom Line on eBay Stock
EBAY stock represents an investment that has just recently broke out of a long-term trading range that had kept shares range-bound. The new trend is higher and my bias will remain bullish until the charts give me reason to be otherwise.
eBay is just one name that has taken advantage of the growth that only the Internet can offer. If growth is a staple in your investment thesis, then I suggest you check out the free report that our top tech editor has just put out: “Big Tech Stocks Poised for More Growth.” Click HERE for more details.