Don't Ignore This Chart!

Ebay Holds the Break


A consolidation within an uptrend is considered the pause that refreshes. Stocks often become overbought after a sharp advance in a short period of time and need to work off these overbought conditions with a correction. Corrections are of two types: price or time. The stock can decline and retrace a portion of the prior advance or the stock can trade sideways for a period of time. Ebay sports the latter with a sideways consolidation.

EBAY Chart

The chart above shows EBAY surging some 45% from late December to February. The stock was clearly overbought after this move and moved into a sideways trading range. This is a consolidation after an advance (time correction) and this is a bullish continuation pattern. EBAY obliged the bulls with a breakout in mid June and this breakout zone is holding. Notice how broken resistance turned into support and held the last three weeks.

Given the long-term uptrend, fresh new high and active breakout, I would expect higher prices from EBAY in the coming weeks and months. A close below 38 would warrant a re-evaluation.

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Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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