PayPal Holdings Inc. (PYPL) was last reviewed in the middle of May. I wrote at that time that PayPal "could be ready to break out over the January highs, but I would not be surprised to see further sideways price action before we overcome the $87 level. When there is a breakout the $100 area will be the price target." The market is digesting PayPal's second-quarter numbers this morning and the stock is trading lower. Is this a buying opportunity or should we shift our strategy? Let's check the charts and indicators for PayPal, which is a holding in Jim Cramer's Action Alerts PLUS portfolio.
In this daily bar chart of PYPL, below, we can see that PYPL finally did overcome the $87 level and jumped above $90 before the retracement this morning. Prices were in a strong technical position before today; PYPL is above the rising 50-day moving average line and the bullish 200-day average.
The daily On-Balance-Volume (OBV) line has been positive for the past 12 months but shows a stronger, more bullish trend since early May. Buyers of PayPal have been more aggressive, and maybe some recent longs with poor trade location will become sellers in the short term. The trend-following Moving Average Convergence Divergence (MACD) oscillator moved above the zero line in May and is still in a bullish configuration above the zero line.
In this weekly bar chart of PYPL, below, we can see a bullish setup. Prices are above the rising 40-week moving average line. The weekly OBV line has been improving the past three months and the MACD oscillator on this longer time frame is also bullish.
In this Point and Figure chart of PYPL, below, we can see an upside breakout and a new upside price target of $105.75.
Bottom line: PYPL can pull back, but with the likelihood of good support below the market I would suspect that a correction will be short-lived.