EBAY shares previously formed a double top pattern, indicating that a downtrend is in order. Price recently broke below the neckline, which confirms that a longer-term selloff is about to take place, but a pullback might occur first.
Using the Fib tool on the latest swing high and low shows that the 38.2% level lines up with the broken neckline around $24-25/share. this might hold as resistance before EBAY shares resume their drop to the previous lows of $22 or much lower.
The 100 SMA is starting to cross below the 200 SMA to confirm that a downtrend is brewing. However, stochastic and RSI are both on the move up from the oversold levels, suggesting that sellers need to take a break for now.
In that case, a correction to any of the Fib levels could happen until the oscillators indicate overbought levels and allow sellers to regain control. The moving averages are closer to the 61.8% Fib at $26.50 and this might be the line in the sand for any pullback situation.
Last month, weaker than expected data for 2015 holiday sales weighed on EBAY shares, contributing to the prolonged downward pressure on prices. The company’s Q4 net income ended at $600 million, 12% down from the same period a year ago.
Earlier this month, a report that Jacobs & Company reduced their holdings of EBAY shares also led to another leg lower, as investors priced in a less upbeat forecast for the company. Still, some analysts are maintaining a “buy” outlook for EBAY shares on stable fundamentals.
The company has recently split its operations from PayPal, which is more focused on the payments arena. Ebay is working on two segments, mainly Stubhub ticket resales and Classifieds, which have the potential to expand the e-commerce company’s revenue streams.
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