EBAY Stock Chart Is in Bullish Alignment
eBay Inc (NASDAQ:EBAY) stock is having a wonderful year-to-date performance in 2017, as shares are currently up 16.5%. This is in stark contrast to the tone of my previous report about this company, published on December 3, 2016, titled “eBay Inc: EBAY Stock Still Has a Bull’s Fighting Chance.”
In that report, I outlined that eBay was testing a very important level of price support following a dismal earnings report that caused the share price to sell off in October 2016. I was quick to point out that, as long as the price remained above support, the bulls had the upper hand.
That report could not have been timed any better, because eBay shares began to advance immediately afterwards. In the months that have followed, quite a compelling bullish trend has developed. This trend is supporting the predominant direction that eBay shares are trading in.
Before I delve into the specific indications that are supporting the current advance in this investment (and what the implications are), it’s worthy to note, for anyone who has not sampled my previous works, that my views on eBay stock are generated using technical analysis. This method of investment analysis is predicated on using historical price and volume data to project the future path of an investment.
The following price chart illustrates the bullish trend that is now supporting the predominant direction that eBay stock is trading in.
Chart courtesy of StockCharts.com
In June 2016, eBay shares exited a range-bound trendless chop, and a bullish advance was born.
This bullish trend began when the stock price broke above the 200-day moving average in July 2016. The 200-day moving average is highlighted in red on the price chart above. This moving average acts as a dividing line between whether an investment is trading in a bull market or a bear market.
When an investment is trading above the 200-day moving average, this is an indication that the stock is healthy and that a bullish advance is underway. The opposite can be said when a stock is trading below the 200-day moving average.
Shortly after EBAY shares crossed above the 200-day moving average, this investment left a price gap on the chart following a better-than-expected earnings report in July 2016. This price gap is labeled as “breakaway gap” because gaps such as this act as an indication that a new trend to the upside has begun.
This price gap acted to reinforce the indication suggested by the break above the 200-day moving averages that a bullish trend was now in development.
These bullish indications were further reinforced by a golden cross that was generated in the beginning of August 2016. A golden cross is a bullish indication that is generated when the faster 50-day moving average (highlighted in blue on the chart), crosses above the slower 200-day moving average (highlighted in red). This is a confirming indicator that is popular among the investment community because it suggests that a new bull market is now in development.
In October 2016, this developing bull market suffered a setback after an earnings report failed to enthuse investors. In true bull-market fashion, eBay stock found support at the 200-day moving average, and quickly began to resume the advance that had begun in July of that same year. This dip in price created the necessary conditions for a new uptrend line.
An uptrend line is created by connecting significant lows on a price chart. This uptrend line effectively captures the bullish trend that began in July 2016. This uptrend line, like the 200-day moving average, is a dividing line that separates a bullish trend in eBay shares from a bearish trend.
At this juncture, I prefer the trend line that is above the 200-day moving average, only because this uptrend line has more points of contact. Aside from the low in December 2016, this trend line was tested in April and May of this year and, each time, buyers were keen to step in to support this bullish trend line. So, as long as the share price remains above this uptrend line, I can only assume that higher stock prices are likely to prevail.
All the indications I have presented are still in bullish alignment, which continues to suggest that the path of least resistance is geared towards higher prices. Therefore, a higher EBAY stock price can be expected.
Bottom Line on eBay
I am bullish on eBay stock because a multitude of indications on the price chart continue to suggest that such a view is warranted. Because my bullish view is contingent on the indications on the price chart, I will continue to hold my bullish view until there are new indications on the chart that suggest that another view is warranted.