EBay: Channel Breakdown UnderwayE-commerce stock eBay reported earnings last week. The backward-looking results were ok, but forward guidance wasn't so hot. The resulting drop is creating some bearish chart patterns.
First, EBAY formed a tight channel between $34.50 and $36.60 since October. It's now breaking the bottom of that channel.
Second, the channel began on October 24, when EBAY gapped lower on weak guidance. Its recent drop on January 29 wasn't technically a gap (because there was some price overlap with the previous session). However, you have a gap down, consolidation and further downward pressure. The direction and high-volume price moves have been negative.
Third, EBAY has formed something of a head and shoulders since last March and April. That pattern follows a failed breakout attempt in early 2018. Nothing bullish in that.
Finally, EBAY has gone almost two years without making a new 52-week high, unlike the broader S&P 500 and Nasdaq-100 indexes. A steady lack of relative strength like that is also a sign of underlying weakness.
A year ago, EBAY had a bullish gap between $31.02 and $32.73. It may now come into play as a downside target. Given the market's recent fears, traders looking to get bearish may want to start with weaker names already under pressure. EBAY could fit that bill.
