Today, PremierMarkets.com is going to add shares of eBay (NASDAQ:EBAY) to our put/short candidate list. We're going to profile the stock for a short in the underlying stock should the shares trade $63. We would follow any shorting with a stop just above $67 at $67.25 and begin targeting the $56 level. We believe shares of EBAY may see weakness to the $56 level as the stock recently achieved a bullish price objective that was indicated back in early April using the vertical count technique. We think the stock will see some profit taking and current levels of trading will keep new bulls out of the stock while they wait for a pullback before initiating positions due to market conditions and current broader market risk levels. Since the stock is currently on a buy signal, PremierMarkets.com will look to reduce some risk in the trade by profiling 1/2 position short at this time.
eBay Chart - $1 box
The current bullish price objective for EBAY using the vertical count would be $81. Due to this, we are only profiling 1/2 position short in the stock, but we want to see a 3-box reversal to the $63 level before initiating a short. We are putting weight in the fact that the stock did achieve a bullish price objective from early April and using the first sell signal in the upward trend as indication that supply/demand is beginning to equalize. We then are going to use our analysis from the bullish percent charts and some weakening we're seeing there to then think that shares of EBAY may succumb to profit taking and lack of buyers at current levels. If institutions want the stock on the bullish side, they're more likely to be targeting the mid-$50 levels for accumulation than current levels. We would consider this type of trade more to the liking of aggressive bearish traders that will show discipline with a stop at $67 and not to be considered by traders that lack discipline and do not use stops in their trading discipline. Traders that are perhaps holding other stocks in their portfolios that have achieved bullish price objectives may want to write some covered calls on those stocks or take out some insurance with some protective puts near-term. Remember that triple-witching is this Friday, June 15th.
Tuesday Night's Webinar
This weekend I found the above chart in EBAY compelling as I was working on some presentation material for Tuesday evening's upcoming webinar on point and figure basics. For those interested in an interactive seminar on the topic of "Starting with Point and Figure Charts" you can jump over to http://www.premierinvestorseminars.com/onlineseminars/jeff061201. asp for a synopsis of what we will be learning. This Tuesday's course is the basic course and an understanding of the basics will be the foundation for an upcoming course on the bullish percent and market/sector risk course. One good trade or avoiding on bad trade could help pay for the course and I'd love to interact in the seminar with some of the subscribers I e-mail with on a daily basis. Near the end of the seminar session we will use many of the lessons learned from the session to take a look at stocks that attendees have questions about. We'll look at them very objectively based solely on supply/demand and I think traders and investors will be somewhat amazed at how objective they become with the stocks they consider buying/selling each trading session.