eBay Inc. (ebay), the online goods trading community, reported its second quarter results yesterday July 18th but thanks to disappointing guidance the stock fell 6.73% on the day. The day’s sell-off brought the stock right back into the middle of its year to date trading range, which however from a multi-year perspective doesn’t throw any negative implications into its way for the time being.
The now close to seven month long trading range in eBay Inc. (ebay) comes on the back of a roughly 490% rally off the 2009 lows and thus qualifies as a much needed consolidation phase. At the same time, this cooling-off period coincides with the stock’s late 2004 highs near the $60 mark, which eventually will be a significant technical area for the stock to push past. All in all, through the lens of the multi-year chart below this choppy sideways range between the $50 and $58 levels has a healthy undertone.
On the daily chart of eBay Inc. (ebay) we clearly see that Thursday’s post earnings sell-off simply brought the stock from the upper end down into the middle of the aforementioned trading range. Here, around the $52.60 (200 day simple moving average, red) and $53.70 levels (100 day simple moving average, blue) the stock may find some near-term support to bounce. Beyond that however, given Thursday’s strong so called breakaway gap, the stock likely has more work to do on the downside. A first and logical level to look for in this price discovery trip is the bottom end of the range, near $50, which from Thursday’s close is another 4.50% – 5.00% lower. Further speaking for more downside in the stock is Thursday’s volume of a little over 43 million shares traded, which is a massive spike relative to the average of around 14 million shares. In other words, Thursday’s downside reversal in eBay Inc. (ebay) spooked more than a few investors, which could lead to more of them following suit.