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eBay Hints At A Trend Change02/21/07 09:43:05 AM
by Gary Grosschadl
The stock price hit a two-year low last August. Is it recovering?
|In the first eight months of 2006, eBay lost more than 50% of its share price, moving down from $48 to $23. Note the doji bottom in August (Figure 1). The small cross of the doji often marks a reversal after a significant rise or fall.|
|A pitchfork or Andrews line is plotted on this weekly chart, suggesting that there may have been a bullish trend change. Using three significant turning points, the result takes the shape of a bullish-pointing pitchfork. Pitchfork theory holds that the stock price travel between the tines of the fork with an eventual test of the median line (center tine). Should a bear trend ensue, the bottom tine or lower median line would be violated. Until that happens, an uptrend is in effect. The current median line target is near $40. Under super bull conditions, the stock could make its way toward the upper median line (currently 52.50).|
|FIGURE 1: EBAY, WEEKLY. This chart shows a bullish pitchfork.|
|Graphic provided by: StockCharts.com.|
|The other main encouraging sign is the move above the ever-relevant 200-period exponential moving average (EMA). The last attempt was repelled late last year, but a second close above this mark occurring now should be more promising. Note the large volume spike several weeks ago that seemed to hint at something developing.|
|Several indicators are also examined. The directional movement indicator at the top of the chart is assuming a bullish stance with an upsloping average directional movement index (ADX) between the DIs (directional indicators), with the positive (green) +DI being overhead. The moving average convergence/divergence (MACD) shows a compelling pattern of timely buy and sell signals with its crossovers. Currently, it seems to be successfully testing the zero-line. The stochastic oscillator shows a recent bullish turn near the 50 line, while the Chaikin money flow indicator (CMF) shows a bullish swing to positive buying pressure.|
|Short- to medium-term traders may anticipate a median line target near $40, especially if the 200-day EMA now acts as support going forward. The fly in the ointment could be a test of the lower median line, should this stab above the 200-day EMA be once again thwarted.|
Independent Canadian equities trader and technical analyst based in Peterborough
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Date: 02/22/07Rank: 5Comment: