EBAY STILL HAS KEY RESISTANCE TO CONQUER BEFORE CHART TURNS TRULY BULLISH

Ebay, Inc. EBAY shares gapped up huge on the PayPal spin-off news earlier this week. However, even that big up day was not enough to push the stock above key “correction resistance” above $58.78. Will the spin-off and the fundamentals of the stripped-down Ebay, Inc. be enough to break through the ceiling of resistance or will the rally that took place earlier this week prove to be nothing but a short-covering counter-trend bounce? Here's what the bulls see in EBAY: • A reasonable price-to-sales ratio of 4.12 • Strong gross operating margins of over 20% • Positive levered free cash flow of $6.26 billion annually • A strong balance sheet: o $7.37 billion in cash versus only $5.32 billion in total debt, o A current ratio of 1.28 and o A debt-to-equity ratio of 28.05% Here's what the bears see in EBAY: • Pricey valuation metrics: o A price-to-book ratio of 3.70, and o A price-to-earnings ratio of nearly 17 (compared to estimated revenue and EPS growth of 13.9% and 13.5% respectively) • A treacherous price chart with resistance at $58.78 – not far above this week's peak of $57.30 What do the technicians have to say about EBAY? Technicians note that despite the gap up that was spurred on by the PayPal spin-off announcement, EBAY shares are still not in completely bullish territory. They say that only a break and close above the $58.78 level would turn the chart truly bullish. Unless and until that happens, technicians note that it is entirely possible that the stock could turn lower and eventually test the long-term uptrend line at around $47. Overall… EBAY seems to be a “show me” situation for both the bulls and the bears. It would seem unwise for bearish bets to be made right now as a move up to resistance at $58.78 could happen without anything really bullish happening on the price chart. It would also seem unwise to buy at the current price as the RSI and %R indicators are both only just now in neutral territory after being overbought on the PayPal news. The bears will want to sell any rips up to projected resistance at $58.78 and the bulls will want to buy only if and when oversold readings occur again – and preferably at identifiable support (the first two such levels come in at $54.54 and $52.66).