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TheStreet Open House

5 Trades to Take After the "Obama Crash"

Stocks in this article: AAPLFBACINTCEBAY

eBay Inc.

Last up is online auctioneer eBay Inc. (EBAY). Even though selling pressure has plagued the tech sector of late, eBay has been able to buck the trend, instead rallying more than 23% since the middle of the summer on strong earnings. But that doesn't mean that you've missed the trend -- EBAY is pointing to higher ground this week.

That's because EBAY is currently forming an inverse head and shoulders setup at the top of its uptrend. The inverse head and shoulders is a bullish setup that's formed by two swing lows at the same level (called the shoulders, by themselves they're a lot like a double bottom) that are separated by a deeper low called the head. The pattern indicates exhaustion among sellers -- and judging from the rally that EBAY has staged in the last quarter, sellers must be pretty exhausted indeed right now. While seeing this pattern at the top of an uptrend isn't textbook (it's typically a reversal pattern), the trading implications are the same: the buy signal comes when shares push through the $51 neckline.

And just in case you think that the head and shoulders is too well known to be worth trading, the research suggests otherwise: a recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits that would have been both statistically and economically significant."

That's reason to pay attention to EBAY this week.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

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