For investors continuing to watch Ebay stock for a longer term buy and hold, further patience is required as the stock continues to remain rangebound. The good news of course is once this congestion phase comes to an end, then any trend higher is likely to extend for some time, an excellent example of Wyckoff’s second law of cause and effect. In other words, the longer the congestion phase lasts (the cause), then the greater the trend (effect) should be once it gets underway. And more importantly when it does, with some excellent support in place below. So what is the technical picture for this Ebay?
The good news for watchers of this stock is the levels to be navigated are all clearly defined on the accumulation and distribution indicator and also on the volume point of control. First, the price based resistance which is denoted by the red dashed line just below $39. This level has been tested repeatedly from below since the start of the year but has held firm on each occasion. Indeed the price action of the last few days is testing this level once more. Below, we have two very strong price regions acting as platforms of support and denoted with the blue dashed lines. One at $35 and the other just above at $35.50, a cluster of strong support in this case. Finally in the centre, and moving to the volume point of control, we have the VPOC itself, the fulcrum of price action and the heaviest concentration of volume at $37.30.
Last week’s wide spread up candle was supported with excellent volume, and what we are waiting for now, is a follow through of this positive sentiment for the stock, with a break and hold above the ceiling of resistance. Once breached, expect to see this stock develop a longer term bullish trend and move firmly away from the VPOC, and into light volume extending through to $44 per share where a low volume node awaits.
The catalyst for a move higher may well be the next earnings report due on 17th July. Last time around EPS of $0.55 surprised the markets and comfortably beat market expectations of $0.51. A repeat may just be enough to drive the stock into the $40 region and beyond with the consensus forecast for the period at $0.49.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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