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
Twitter and become a fan on Facebook.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV