Shares of PayPal   (PYPL) 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) 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.