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New Calls

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New Puts

eBay Inc. - EBAY - close: 29.70 change: -1.08 stop: 32.01

Company Description:
Founded in 1995, eBay created a powerful platform for the sale of goods and services by a passionate community of individuals and businesses. On any given day, there are millions of items across thousands of categories for sale on eBay. eBay enables trade on a local, national and international basis with customized sites in markets around the world. Through an array of services, such as its payment solution provider PayPal, eBay is enabling global e-commerce for an ever-growing online community. (source: company press release or website)

Why We Like It:
Jim has mentioned EBAY as a bearish candidate in his wrap a couple of weeks ago. We think today's breakdown under technical support at its 100-dma and 200-dma in addition to price support near $30.00 looks like a good spot to consider buying puts. Volume was pretty strong on today's sell-off and that's usually a bearish sign. Driving the decline in EBAY were bearish comments from a Piper Jaffray analyst who believes that EBAY's listings for the fourth quarter were under what EBAY was forecasting. This would suggest that fourth quarter earnings will come in below estimates. EBAY has broken its bullish trend from 2006 but the low today was a bounce off an intermediate trendline of support (see chart). We would consider puts here but traders have a choice of entry points. You could wait for a new relative low (under $29.26) or look for a failed rally under $31.00. We're putting our stop loss at $32.01. Our target is the $26.00 level. We would aim lower but the company has earnings coming up in about two and a half weeks and we do not want to hold over the report.

Suggested Options:
We are suggesting the February puts even though we plan to exit before EBAY's late January earnings report.

BUY PUT FEB 30.00 XBA-NF open interest=3983 current ask $1.85
BUY PUT FEB 27.50 QXB-NY open interest=1734 current ask $0.85

Picked on January 08 at $ 29.70
Change since picked: + 0.00
Earnings Date 01/24/07 (confirmed)
Average Daily Volume = 14.5 million
 

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