Is EBAY Technically Cheap?

Several articles on eBay (EBAY) have cropped up recently. A Seeking Alpha article, titled “Defending eBay In A Big Way” states “eBay has a vibrant economic castle and posses one of the strongest business models on the market today” and “The firm is cheap on almost every valuation multiple. Shares are worth ~$90.”

A ‘The Street' article titled “eBay's Share Price weakness Is Your Buying Opportunity” states “..the stock is technically cheap..“.

Technically cheap it is. EBAY has plunged to the November 2013 lows, with On Balance Volume, an Accumulation/Distribution indicator, diving with it.

Focusing in we see that since early April EBAY's volume on down-close days has been overwhelming volume on up-close days, and EBAY has just broken below 18-month support on high volume:

So yes, it is technically cheap. It may be undervalued and this could be a great time to buy the stock.

But what is the track record of institutional participation in this stock this time of year? Is there any evidence they take (or lose) interest in EBAY this time of year? After all, eBay's strongest quarter for earnings is the last quarter of the year. Perhaps institutions buy into the stock several months ahead of time to play a rise into the strong 4th quarter.

While there is a slight upward bias going into the end of the year, the track record of the next 5 weeks suggest this stock is typically ignored by the institutions. While the average loss is only 4%, and the loss ratio is only 60% (losses in 9 out of 15 years), in recent years the losses have been larger, and the gains smaller over this period.

The writers of the eBay articles present good cases for buying the stock right now. This may be the year that institutions pony up at the table after coming to similar conclusions. But from looking at the seasonal picture, I'm not expecting that. Stocks move primarily from institutional participation. When they're not interested in a stock, from either a current or historical perspective, I'm not.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2014 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

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