A major sell-side firm cut their fundamental rating on eBay (EBAY) to "sell" with a $42 price target. Let's check out the charts and indicators again. In our last review on May 24 we wrote that "Traders could probe the long side of EBAY above $47 risking to $43." Let's see what happened.
In this daily bar chart of EBAY, below, we can see that prices bounced but have subsequently stalled and could decline to hit our stop recommendation today. Prices are trading below the declining 50-day moving average line and the declining 200-day line.
The On-Balance-Volume (OBV) line has remained depressed the past few weeks and has not shifted to show signs of more aggressive buying, unfortunately.
The Moving Average Convergence Divergence (MACD) oscillator crosses to a cover shorts buy signal but remains below the zero line.
In this weekly Japanese candlestick chart of EBAY, below, we can see that prices are still struggling to stabilize. The slope of the lagging 40-week moving average line remains negative (bearish). The weekly OBV line is still weak and tells me that sellers of EBAY remain more aggressive than buyers. The MACD oscillator has narrowed but has not crossed to the upside.
In this daily Point and Figure chart of EBAY, below, we can see a potential downside price target in the $34 area.
In this weekly Point and Figure chart of EBAY, below, we see a price target in the $28 area.
Bottom line strategy: If EBAY reaches our recommended sell stop at $43 it will be time to stand aside.
