PayPal Holdings Inc. (PYPL) represents new forms of digital payments and was noted by Jim Cramer during Monday's Mad Money program. PYPL has soared from its March low and has nearly doubled in price. Prices are extended above the popular moving averages so it is fair to ask whether PYPL could be vulnerable to a correction.
Let's check out some charts.
In this daily bar chart of PYPL, below, we can see a number of short-term clues that suggest we could have a pullback. We mentioned that prices are extended above the moving averages that are designed to smooth out the price action. When prices get too far away from the 200-day moving average line there can sometimes be a movement back toward the line.
The trading volume has not expanded on the recent rally and that is not what old-time chart readers like to see. The daily On-Balance-Volume (OBV) line has been moving sideways since early May and that suggests we are seeing a balance between buyers and sellers.
The 12-day price momentum study in the lower panel shows lower momentum peaks from May into June and that is a bearish divergence when compared to the price action, which has made higher highs in the same time period.