Trading Idea - eBay A Doji Close

Published on Thursday, 14 March 2013 18:54 Written by TradersHuddle Wire

New York, March 14th (TradersHuddle.com) - Shares of eBay Inc. (NASDAQ:EBAY) closed the trading day lower by $2.27 or -4.29% from its previous close. eBay's price action formed what is considered to be a doji close, where the open and close prices are very close to each other, mainly signaling an indecision between buyers and sellers.

eBay Inc. (NASDAQ:EBAY) operates an online auction community. The service is used to buy and sell products and services such as coins, collectibles, computers, memorabilia, stamps and toys, and sporting tickets. eBay also offers, through its subsidiary PayPal, secure online payment services.

eBay's trading range is defined by a trough, which marked calculated support at $50.62 and by a peak that set the resistance point at $56.00. These levels are closely watched by traders managing their positions.

Traders wanting to establish a position in eBay or traders that are already holding the stock can use the doji close to their advantage, since the pattern present a short-term pause in the stock's price action. This pause results in an entry point for traders depending of which way the stock resolves this short-term indecision.

The Doji is an important candlestick pattern that provides information on their own and as components in a number of important patterns. Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns.

Any bullish or bearish bias is based on preceding price action and future confirmation. In the case of eBay, given that the stock finished the session lower, bears should monitor the stock, as it could reverse if it manages to trade above its intraday high. Below a Doji illustration: