Middling eBay Stock Could See Another Surge Soon

The shares of eBay Inc (NASDAQ:EBAY) have exhibited a pattern of pulling back before rallying to yet another record high for the better part of the year, gaining support at the 200-day moving average, and more recently at the 100-day trendline. True to form, the stock just hit a record high of $81.19 on Oct. 22, before pulling back to consolidate below the $77 level for the better part of November -- thanks in part to a lackluster response to its third-quarter earnings report.  

This pullback put EBAY within one standard deviation of a trendline that's made it onto our radar, thanks to data from Schaeffer's Senior Quantiative Analyst Rocky White -- the 80-day moving average. Per White's study, seven similar signals have occurred in the past three years. One month later, eBay stock was higher 83% of the time, averaging a 5.6% return positive in this time period. A similar move, from its current perch at $74.50, a similar move would put the security just below the $79 level. 

As we mentioned before, eBay stock is coming off a post-earnings drop, though this pullback was muted, with several analysts lifting their price targets after the event. The 12-month consensus price target of $77.95 is still just a slim 4.6% premium to current levels, and of the 16 in coverage, 10 consider EBAY a "hold." This could invite more bull notes, should EBAY stage another bounce. 

Short interest, meanwhile, has skyrocketed in the most recent reporting period, up 52.6%. Should some of this pessimism begin to unwind, it could help propel the security higher, especially considering short interest accounts for 6.3% of eBay stock's float, or over a week's worth of pent-up buying power. 

With all this in mind, speculating on EBAY's next move with options might be a prudent play. The equity's Schaeffer's Volatility Index (SVI) of 29% stands in the relatively low 20th percentile of its annual range. This implies the options pits are expecting muted volatility for the security.