eBay stock is experiencing a head and shoulders pattern
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eBay Inc (NASDAQ:EBAY) is experiencing a bear flag in the form of a head and shoulders pattern. The equity is breaking below its 50-day and 200-day moving averages, while its 20-day moving average is now curling lower.
Furthermore, the stock’s recent slide has it back below the $44 level, which provided pressure in March and April, and its earnings candle low, which has been acting as resistance over the past few trading sessions. EBAY failed at the 200-day moving average on the hourly chart, and the 45-strike call level this week.
There is plenty of optimism to unwind in the options pits, per EBAY’s 50-day call/put volume ratio of 1.18 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 92nd percentile of its annual range. Plus, call buyers have typically been wrong on direction over the past couple years.
The security is seeing attractively priced premiums at the moment, per eBay stock's Schaeffer's Volatility Index (SVI) of 25%, which sits in the low 3rd percentile of its annual range. Furthermore, the security's Schaeffer's Volatility Scorecard (SVS) sits at a relatively high 82 out of 100, meaning the e-tailer has exceeded option traders' volatility expectations during the past year.
The equity's relative strength index (RSI) bumped into the round 50 level, subsequently rolling lower while in a negative divergence. Our recommended put option has a leverage ratio of 10.1 and will double on a 8.8% drop in the underlying equity.