Shares of PayPal   (PYPL - Get Report) were up 3% in Monday's session, closing just under the 50% Fibonacci retracement level of their trading range since being spun off from parent eBay   (EBAY - Get Report) and trading as an independent company. On Tuesday, the stock continued its run, closing up another 2% and breaking through the 50% retracement level. Technical indications are turning positive, and PayPal looks like it has put in a base and is ready to begin trending higher.

The stock price moved in a wide range in its first month of trading, but for the last month it had been consolidating around a rising 50-day moving average and the $36 retracement level. Price momentum indicators have been relatively flat for this period, as would be expected during a consolidation phase, but the relative strength index is holding above its center line and 21-period signal line, and moving average convergence/divergence is making a slight bullish crossover above its center line. Accumulation/distribution has been tracking higher and above its signal average since the initial low, and the money flow index, a volume-weighted relative strength measure, is over both its signal and center lines. The stock is positioned back in upper Bollinger band range, and bandwidth is extremely contracted, a condition that often precedes volatile moves in price.

PayPal is a good risk/reward long candidate at its current level, using a trailing percentage stop under the 50-day average.
 
 
 

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.