This powerful selloff is attracting extremely heavy trade, but a low-risk buying opportunity is developing.
After the Brexit panic-selling wave, PayPal mounted an impressive rally. By Wednesday of the this week, the stock had gained over 17% from the June 27 bottom. Heading into today's session, PayPal was sitting just shy of this rally's peak while stabilizing near the May high. This morning's flush has not only wiped out the the upside momentum, but a fairly ominous top near $40.50 is now in place.
It will likely take some time for PayPal to recover from this breakdown. The first stage will be building a base near solid support. This process may have begun today.
In the near term, patient, PayPal bulls should keep a close eye on the $36.75-to-$35.70 area. This key support zone is marked by an upward-sloping 200-day moving average at the upper band. Just below is a powerful breakout gap that was left behind as the stock broke through the upper band of its bearish channel. At the lower band is the July low.
If PayPal can regain its footing in this area and avoid putting in a new July low, the damage from today's' flush may be repaired.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.