During Monday night's "Mad Money" program, Jim Cramer reminded viewers that the markets are a zero-sum game. That means money is flowing out of high-growth cloud and tech names, like PayPal Holdings (PYPL) , and going elsewhere. We looked at the charts of PYPL last week, when we said, "PYPL did not make a large-top formation, but we can point to some bearish divergences. Things could change, but right now I would only anticipate a modest amount of price weakness."
A fresh look now won't hurt as prices have broken below the 50-day moving average line and have pushed into a support zone from $110 to $105.
In this updated daily bar chart of PYPL, below, we can see two small downside price gaps in the past few days. These are small gaps, but trading volume has increased on the decline, which is a change in the pattern we have seen on prior corrections or dips. The slope of the 50-day average line is now flat, but the 200-day line is still rising. The daily On-Balance-Volume (OBV) line has turned flat over the past two months and it has declined in recent days if you look closely.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside for a take-profits sell signal.
In this weekly bar chart of PYPL, below, we can see the price weakness of the last week or so and a "close below the low of the high week" signal. A retest of the rising 40-week moving average line now looks likely. The weekly OBV line shows weakness and the MACD oscillator has crossed to the downside for a weekly take-profits sell signal.
In this Point and Figure chart of PYPL, below, we can see the difference from last week when the chart projected an upside price target. Now a downside price target of $98 is shown.
Bottom line strategy: With a downside price target of $98 from the Point and Figure chart (above) and the top end of major support beginning around $90 the long side of PYPL holds more risk. Act accordingly.