Can PayPal Continue to Rally After Stellar Earnings?

PayPal beat estimates on earnings and revenue, sending shares higher. How far can the stock go on this latest rally?
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PayPal  (PYPL) - Get Report shares continue to bulldoze higher, up about 5% on Thursday even after fading from the session highs.

The move came after the company beat on top- and bottom-line results, with PayPal turning in another impressive quarter despite a massive run from the March lows.

Ahead of the print, shares were up 125% and hit new all-time highs. In other words, expectations were quite high with investors needing some strong results to keep the run alive.

Even more impressive with PayPal’s gap-up rally is the fact that the overall stock market opened under notable selling pressure on the day.

The results are likely keeping Square  (SQ) - Get Report in bulls’ good graces on Thursday, with shares flat on the day vs. a down day in the market.

Let’s look at the charts.

Trading PayPal Stock

Daily chart of PayPal stock.

Daily chart of PayPal stock.

Despite PayPal stock hitting new highs ahead of earnings and more new highs after the report, the stock is not yet overbought while momentum shifts back into bulls’ favor. At least, that’s according to the RSI and MACD readings highlighted on the chart with blue circles.

Additionally, the setup has remained quite bullish. With shares forming a series of higher lows and stalling at resistance near $185, we had what’s known as an ascending triangle formation.

That’s a bullish setup, with investors looking for a breakout over resistance. With earnings, we’ve got the breakout move investors were seeking.

However, one of our upside targets came into play at $193, which is the 261.8% extension. If it can close above that mark, it leaves $200 in play — just above Thursday’s high of day at $198.66 — followed by the three-times range extension near $209.

On a pullback, bulls want to see prior resistance at $185 hold as support. That would be very constructive price action for longs and improve the odds of a retest of the highs.

That said, this one has run a ton and a dip in the Nasdaq could pressure PayPal stock. On the flip side, a rising Nasdaq could lift PayPal too. Remember, we hear from tech’s biggest names after the close on July 30th.

Should $185 fail as support, look for the 50-day moving average to buoy PayPal, followed by the two-times range extension near $165.