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Saturday, March 16, 2013

$ebay, baby

EBAY acted like it was going to bounce off of its 90sma, but was bitch-slapped, a few times, by timely chatter.

When the 90sma was tested late last week, it made an intra-day reversal. Sweet, all according to plan as the stock had the upward bias to bounce off support. As this week started, ChannelAdvisor indicated that February retail sales were weaker than anticipated for eBay.  That allowed the stock to test 51, but make an impressive reversal thanks to analyst support, and the upward bias.  The very next day, on Wed, the stock just lost it.  Comments from North American boss at Mastercard regarding increasing fees were at the root of the decline.  An analyst with Evercore Partners then supported the stock highlighting that the street is already factoring in the increase in fees, and the fee should have a modest effect on Paypal. (I agree with Evercore.)  But the upward bias was lost.

With the lack of strength on Thursday, the stock collapsed from the support on Friday.  Now what?

Fundamentally, I am a fan of eBay here. They have structured their businesses to compliment and the proof is in the pudding.  Paypal alone is a viable competitor in the payment space. And with their new focus on improved developer support/tools, and a focus as an innovator, they are a real threat to the traditional card companies. (Their purchase of Duff Research can also leverage GSI.)  I would even argue Paypal is pushing faster to all facets of payments than any competitor. Leaving them in a great position for the brave new world of ubiquitous online/offline payments.

Now that the 90sma support appears to be broken, eBay will probably consolidate.  The current level, around 50, does act as a horizontal support on the daily. I am not sure of the strength of this support given the weakness on Friday. More likely, the weekly and/or monthly SMAs supports will be achieved.

The weekly suggests the stock could bounce off the 50sma, where it could be the bottom range of the consolidation process.  As the stock consolidates near the high40s/low50s, the monthly 20sma will approach the stock price, and could act as the footing for eBay to resume its uptrend.

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