Tech stocks sold off heavily last week and the beginning of this one, with eBay (NASDAQ:) being no exception. With no clear catalyst behind the selloff and really nothing being wrong with the tech sector, what may have encouraged investors to lock profits may be extreme valuations. Technology continues to be vitally important in our lives, especially following recent adjustments due to the coronavirus pandemic. Thus, in the long run, we would expect tech stocks, including eBay, to perform well. However, for now, we see decent chances for some further correction.
We reached that conclusion after looking the technical picture of the stock. Last Thursday, it completed a failure swing top formation, falling below the 53.70 barrier, which acted as the pattern’s neckline. Subsequently, the price hit support near 50.80 and then, it rebounded to test the 53.70 barrier as a resistance this time. That said, the chances for another lower high remain decent in our view, and thus, we would consider the very short-term outlook to be somewhat negative for now.
In order to start examining lower areas, we would like to see investors allowing another slide, below 50.80. This would confirm a forthcoming lower low and may initially target the 46.75 zone, which is defined as a support by the low of June 15th.
Another break, below 46.75, could extend the slide, perhaps towards the 42.95 hurdle, marked by the low of May 27th, and the inside swing high of May 12th.
Shifting attention to our daily oscillators, we see that the RSI lies below 50, but turned up lately, while the MACD runs below both its zero and trigger lines. Both indicators detect downside speed, but the fact that the RSI rebounded make us somewhat cautious over some further recovery before the next leg south, and enhances our choice to wait for a dip below 50.80 before getting confident on more declines.
On the upside, a recovery above 55.35 may discard the bearish case and turn the outlook to neutral. Investors may then target the 59.15 barrier, or even the all-time high of 61.05, the break of which will drive the stock into uncharted territory.
Thus, with no prior peaks or troughs to mark new resistance levels, we would consider as a potential target the psychological zone of 65.00.