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eBay's Share Price Weakness Is Your Buying Opportunity

NEW YORK (TheStreet) - eBay Inc (EBAY) shares are down nearly 20% since setting an all-time intraday high at $59.70 on Feb. 28. The stock has a reasonable 12-month forward price to earnings ratio of 18, which matches the P/E ratio of the S&P 500. eBay is cheap versus the retail-wholesale sector P/E at 26.

The downside for eBay accelerated following the company's first-quarter earnings report. eBay reported earnings per share of 58 cents on April 29 beating analysts estimates by a penny.

The same day TheStreet's Antoine Gara wrote, eBay's $3 Billion Tax Charge Clouds Strong Earnings Growth. The next day the stock gapped below its 200-day simple moving average, now at $53.41.

Investors did not appreciate the tax charge, and shares continued to tumble to as low as $48.14 on Wednesday. The stock is now cheap enough technically to buy.

Courtesy of MetaStock Xenith

The daily chart shows that eBay ($48.90) shows the gap below its 200-day simple moving average that occurred on April 30. The stock is below its 21-day, 50-day and 200-day SMAs at $50.71, $52.25 and $53.41 and the 12x3x3 daily slow stochastic shows an oversold condition with a reading below 20.00 at 16.92.

So the stock is technically cheap following the decline from an all-time intraday high at $59.70 to its 2014 intraday low of $48.14 on June 11.

Courtesy of MetaStock Xenith

The weekly chart for eBay is negative but oversold with its five-week modified moving average at $51.35, which makes weakness to its 200-week simple moving average at $42.25 a buying opportunity.

Investors looking to buy eBay shares should consider using a good 'til cancelled limit order to buy weakness to a weekly value level at $46.62, and then add to the position at the 200-week SMA.

Investors looking to sell eBay shares should consider using a good 'til cancelled limit order to sell strength to a monthly risky level at $52.10. A semiannual risky level is at $56.00.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

>>Micron, Kodiak Oil & Gas, 2 Others Are Momentum Stocks to Watch

Richard Suttmeier is the chief market strategist at ValuEngine.com.

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