EBay (EBAY) Bears Are at the Gate
NEW YORK (TheStreet) -- Carl Icahn is a shrewd, intelligent, sometimes visible, and big investor. Did I say big? It was recently reported that Mr. Icahn sold his 46.3 million shares of eBay (EBAY) - Get Report (and took a 3.8% ownership stake in PayPal) in the third quarter.
In this short-term chart of EBAY, above, we can see the trading volume in the third quarter. Notice the big increase in volume in July. The four dollar rally to $29 from $25, with daily volume surging to between 20 million and 40 million shares a day, would have been a great time for Carl's trading desk to be aggressive and scale-up sellers of EBAY without attracting unwanted attention or depressing the price. Did I say shrewd?
This chart, above, also shows us how EBAY traded after Carl liquidated his position -- it rallied to a slight new high earlier this month and the On-Balance-Volume (OBV) line did not match the new high. This subtle volume divergence suggests underlying weakness as volume did not expand in the direction of the trend.
This longer-term picture of EBAY shows us two bearish divergences. In the lower panel, we have a momentum study showing the price momentum or rate of change of prices. The July rally had stronger momentum than the new high made this month. This divergence suggests that the bulls are getting "winded." Also notice the Moving Average Convergence Divergence (MACD) oscillator did not make a new high with price in November.
Outlook? EBAY may flounder a bit but with a huge support zone in the $24 to $20 area, I wouldn't worry too much right now.
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