Here's what Jim Cramer had to say about one of the stocks that callers offered up during the Mad Money "Lightning Round" Tuesday evening, namely eBay (EBAY) : "eBay is chronically undervalued," he said.
Let's check on the charts and indicators.
In this daily bar chart of EBAY, below, we can see that prices more than doubled from their March low to the early July high. From the July zenith prices have worked lower and have tested some support from June in the $50-$47 area.
The slope of the 50-day moving average line is now negative but the slower-to-react 200-day moving average line is still rising.
The On-Balance-Volume (OBV) line has been weakening since the middle of July and that tells us that traders have shifted from being aggressive buyers to aggressive sellers.
Earlier this month the Moving Average Convergence Divergence (MACD) oscillator slipped below the zero line for an outright sell signal.
In this weekly bar chart of EBAY, below, we see a mixed to bearish picture. Prices are still in an uptrend above the rising 40-week moving average line but this is a lagging indicator.
The weekly OBV line shows weakness since July and the MACD oscillator crossed to the downside last month for a take profits sell signal.
In this daily Point and Figure chart of EBAY, below, we can see a potential downside price target in the $44-$43 area.
Bottom line strategy: The charts and indicators of EBAY look like they are heading lower the next several weeks. A decline to the low $40's looks possible so new purchases should be deferred.
