EBay At Resistance - Will It Be A Break-Out Or A Failure?

shares have rallied nicely recently, but now face a binary outcome scenario at key resistance. Over the last three and a half months, eBay has gone from a miserable, underperforming stock to one of the go-go names the fast money crowd seeks out for long-side profits in the rising tide of the bull market.

EBay shares have given the long downtrodden eBay bulls some hope recently with their run from $48 in June to $53.72 or so currently (after peaking at $54.44 on Monday). That recent life has the bulls hoping that this rally is much more than just a filling of the downside gap that occurred in early May. If it is more than just a bear market (for the stock) bounce, the bulls could be rewarded with a continued run up to the $55.80 to $56.67 range – and possibly even higher.

EBay bears would step in at this point and say, “Not so fast, my friend!” The stock has not even conquered the obvious resistance created by the 100% Fibonacci projection line for what appears to be an “ABC” upside correction at $54.39. They add that right at this week's peak appears a downtrend channel line as well as the aforementioned gap-filling resistance at $54.54.

We will know who wins this battle pretty quickly. If eBay can manage to close above $54.39 and $54.54, the bears will have to run for cover as fast as possible – which will only add to the upside momentum. On the other hand, if the stock fails to conquer that resistance – as it did yesterday – we may very well see a resumption in the downside action that so dominated this stock's chart prior to June.

Technicians note that sellers of eBay will want to stake their positions between Tuesday's level (around $53.72) and the $54.39 level. Stops would naturally be honored on any close above the gap-fill level of $54.54. The downside target for the bears comes in at around $46. For aspiring eBay longs, technicians say the only play is to either go long the stock once it breaks out above $54.54 and then re-tests that level as new support OR to wait for the stock to pull back to the mid-$40s along with the bears and then buy. The stop-loss on bullish bets down there will have to be determined if and when the stock falls that far.