|At this point it can only be considered a double top threat as the actual double top would be confirmed with a break below its troughline. I am suggesting a possible double top because of the many negative divergences seen on this daily chart.|
|Earlier in the week there were two candlestick hints at a possible topping phase. The first was a shooting star candlestick with its characteristic long upper shadow and small candle body, followed by a couple of spinning top candlesticks with, again, small candle bodies and shadows on both ends. Both these formations suggest a hesitation or loss of upside bullish momentum. These top warnings have yet to confirm by breaking below $67.50 (bottom of previous large bullish candlestick), or to negate the candle warnings with a move to a new high.|
|EBAY in danger of topping out on this daily chart.|
|Graphic provided by: Stockcharts.com.|
|The many negative divergences are noteworthy and lead me to believe the downside probability is greater than any upside. At the top of the chart, notice the peaks on the +DI (bullish movement component of the DMI or directional movement indicator). The first two +DI peaks showed negative divergence to price action, followed by a downleg, establishing the troughline. Now in a similar fashion there is a negative divergence hinting at a downleg. Next is a negative divergence between price action and volume, showing much less conviction by the bulls that this recent high is sustainable. |
All the lower indicators are also displaying negative divergences. The stochastics indicator shows an overbought situation with a downturn beginning from the 80 level. The CMF or Chaiken money flow indicator also shows a distinct divergence to price action, this being noteworthy because it reflects a supply and demand relationship versus the standard trend and momentum indicators.
|If the overall markets surge higher this stock can follow in sympathy but upside seems limited with so many negative divergences. A move below $67.50 may be an indication a double top failure. If so, then two downside targets are shown. The first is the zone between $61.50 and 62.50 marked by a previous shooting star at the extreme left of the chart. The lower target would be $59.50. This is the measured completion target from the top to the troughline applied to a downside move below the troughline. This of course doesn't mean it will go down that far, only that it can, should a sufficiently bearish situation arise.|
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