EBAY BULLS MUST STEP UP BEFORE A SCARY HEAD & SHOULDERS FORMATION PLAYS OUT

Ebay, Inc.

shares are getting precariously close to a key technical support level in the midst of this nasty market sell-off. Ebola, war, economic slowdown, etc. all are clearly weighing on the market in general. With all of the index selling going on, Ebay's stock is not surprisingly getting caught up in the down swoosh. Can the company's upcoming earnings report save the shares from another 20% downside – which is what the technicians say is in store if support fails to hold up. Bird's eye fundamentals on EBAY… The bulls love Ebay's huge $17 billion revenues, healthy $5.7 billion in annual levered free cash flow, monster cash hoard of $7.37 billion and clean balance sheet. The growth rate estimates are around 13% - 14% for 2015 – which makes the 15-ish P/E ratio more appealing. However, the bears point out that the company's profit margins are razor thin and that the stock isn't necessarily a bargain at these prices – with only the P/S of 3 and change showing up in “undervalued” territory. The technical take on EBAY… EBAY shares have been a trader's delight since early 2013 – generally working up and down within a $12 trading range between $48.06 and $60. Right now, the stock is threatening to test the lower edge of that trading range – which according to technicians is the “neckline” of a potential “head & shoulders” topping formation. Should the $48.06 support level be violated on the downside on a closing basis – especially a monthly closing basis – the projected downside target for EBAY will be $38.35. Bears looking to jump in the EBAY fight on the short side will be looking to do so on a bounce to $52 - $53 if it occurs prior to the “neckline” being violated. Otherwise, they will wait for the first rebound following that breakdown to sell. Overall… Ebay is oversold – right along with the market – and could easily bounce 10% in a real hurry. As noted in the technical section above, though, a convincing close above $53 would likely be necessary to turn the tide in the favor of the bulls.