Trading Idea: Is eBay Breaking Down?

Published on Friday, 29 June 2012 07:56 Written by TradersHuddle Wire

New York, June 29th (TradersHuddle.com) - Shares of eBay Inc. (NASDAQ:EBAY) closed the trading session at $40.78 below calculated support at $41.49. The stock broke long setups, prompting the bulls to worry that this move might give the bears the upper hand.

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 stock was trading in a well defined range with support at $41.49 and resistance at $43.94; given that this range was broken traders will be closely monitoring the stock's price action for clues of direction.

From a technical perspective, it can be expected that previous support becomes resistance, as the new range gets defined. However, $41.49 will remain in focus as eBay's price action places the stock near the broken support. Traders will be waiting to see if it can bounce back and return to its previous range.

Traders wanting to establish a short position in eBay can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $41.49. However, if traders want to build a long position, the best entry point to do so is when the price action takes the stock back to calculated support.