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Is PayPal Stock Close to a Bottom?

It's been a tough run for PayPal stock, which is now down 11% on earnings and more than 30% off its highs. When will it bottom?

PayPal  (PYPL) - Get PayPal Holdings Inc Report shares are getting rocked on Tuesday, down more than 11% at last check in the session.

When the company reported earnings after the close on Monday, the knee-jerk reaction was higher on news of a Venmo deal with Amazon  (AMZN) - Get Amazon.com, Inc. Report.

Despite a top- and bottom-line beat though, PayPal shares were trading about 5% lower in the premarket as guidance came up short of analysts’ expectations.

Technicians were wondering if earnings would end the stock’s painful decline, but clearly the results are only adding insult to injury.

PayPal shares were under duress on reports that it was sizing up Pinterest  (PINS) - Get Pinterest, Inc. Class A Report for an acquisition. 

However, the stock continued lower following a short-lived bounce even as PayPal said it was not pursuing the deal.

When will enough be enough?

Trading PayPal Stock

Weekly chart of PayPal stock.

Weekly chart of PayPal stock.

Above is a weekly look at PayPal stock, which is now working on its fourth straight weekly decline and eighth weekly decline in the last 10 weeks.

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Ahead of earnings, the stock was trading down into key support in the low-$220s. Notice how this area has been a strong bounce area since the beginning of the year. 

The stock was also holding up over its prior 2021 low at $223.09 and just above its 21-month moving average.

However, the reversal trade did not come to fruition with today’s mild gap down. Instead, the selling has only accelerated.

The question now becomes, is PayPal worth a dip buy? As a trader, the answer seems like no. As an investor though, there seems to be some opportunity here.

Despite the recent price action, PayPal is a great company with strong growth and solid management. 

Second, its decline should be nearing a “washout” point, as it has declined immensely over the last few weeks. Declining volume amid that selloff is also a positive. 

The stock is now down 34% from its all-time highs and should soon start to find some buyers.

Lastly, the $200 area was a big breakout level in the fourth quarter of 2020. Further, the 10-quarter moving average comes into play near $200.

If PayPal can find its footing near this area, we may see a bottom in the coming days. If this area can’t hold as support, then $175 may be the next “leg down” zone.