Paypal Stock: Setting Up, Once Again
Paypal Holdings Inc (NASDAQ:PYPL) stock and I have a love/hate relationship now. This may sound silly, but I was convinced in late October that PayPal stock was on well on its way to forging new all-time highs, I even had a price objective in mind. My optimism and enthusiasm was based on a particular feat that stock was able to achieve. My heart was broken when this event did not play out as I had originally expected, and as a result, my admiration and view of PYPL stock has now been slightly tainted.
When a stock doesn’t play out according to plan, I have found that the best course of action is to step aside from the trade and perhaps revisit it at a later date. This ensures that any new trade I engage is devoid of any emotions. Clearly, I must still be suffering some emotional distress after PYPL stock betrayed me. Jokes aside, I am focusing on PayPal stock because the price has once again returned to that pivitol point, and that original surge that I was expecting has a chance of occurring once again.
The following stock chart illustrates the catalyst that had me believing that PayPal stock was set to soar.
Chart courtesy of StockCharts.com
The stock chart above illustrates a horizontal trend line has refuted price from moving beyond it on a sustained basis. This level is an important level of resistance and if PayPal stock can remain above it on a sustained basis, it would suggest that much higher prices are likely.
If I were to once again place a target on a potential run that could come to fruition, I would use the depth of the range below the horizontal trend line and extrapolate it above it. This generates a potential price objective of $53.00 and this target is contingent on a successful break of horizontal resistance.
The price chart above illustrates that Paypal stock did indeed break above this resistance in October 2016, but it was unable to sustain that break. This is the failed signal that has tarnished my view of PYPL stock.
Failed signals are to never to be ignored, and when a trade that is based on signal fails, it is imperative to unwind the trade as soon as possible. The urgency to unwind the trade is based on the notion that other traders who mistook the same signal will also be trying to unwind the trade. This results in a stampede for the exits and price has a tendency to move against a trade very quickly.
The good news is that the sell-off that proceeded the failed signal did not do any technical damage to the Paypal stock chart, and the following chart illustrates that a bullish trend is still intact.
Chart courtesy of StockCharts.com
A bullish uptrend began to develop in early 2016. This trend is characterized by higher highs and higher lows, and the uptrend line is created by connecting these higher lows. The uptrend line has continued to halt any selling pressure that has hit PYPL stock. The trend line is why I believe that another attempt at a successful break above resistance is possible. It indicates that the bull market is still intact.
The trend line not only defines the bullish trend in PYPL stock, but also the risk. If PayPal stock closes below this trend line, I will have all the reason to believe that a bearish trend has begun, and as a result, I would act appropriately, given these circumstances.
Bottom Line on PYPL Stock
PayPal stock has once again returned to test a pivotal level of resistance. A successful break above this level would suggest that a run of epic proportions was going to push stock higher.