PayPal Holdings, Inc (NASDAQ: PYPL) gapped up slightly on Monday after reacting bullishly to a triple bottom pattern Benzinga called out on Nov. 12. The stock then traded down to almost completely fill the gap, which should give bulls more confidence going forward.
The stock had lost about 26% of its value since Oct. 20 when it was announced PayPal may be looking to acquire Pinterest, Inc (NYSE: PINS) at a premium of $70 per share, which PayPal later denied. The fall was exacerbated on Nov. 9 after the financial services company reported a third-quarter revenue miss and issued below-consensus guidance for the fourth quarter.
A number of well-known traders and analysts have been vocal recently saying they believe PayPal is a buy, however, and on Monday the stock looked to be taking the first steps in printing a reversal to the upside.
See Also: How to Buy PayPal Stock
The PayPal Chart: On Monday, PayPal was trading up into a higher gap left behind on Nov. 9 between $212.40 and $226.25. Gaps on charts fill about 90% of the time so it’s likely PayPal will trade all the way back up to fill the gap completely in the future.
Although the stock has printed a higher high above the Nov. 9 high-of-day near $213, PayPal hasn’t yet printed a higher low. A higher low will be needed in the future to confirm the stock is trading in an uptrend. The higher low can print anywhere above $200.68, which is the most recent low.
Technical traders may have predicted PayPal would trade higher because between Nov. 8 and Nov. 11 the relative strength index (RSI) was hovering near the 22% level. When a stock’s RSI reaches or exceeds the 30% mark it becomes oversold, which can be a buy signal for technical traders.
PayPal’s next hurdle will be regaining the eight-day exponential moving average as support. Currently, the eight-day EMA is trending below the 21-day, which is bearish. PayPal is also trading below the 50-day simple moving average, which indicates longer-term sentiment is bearish.
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Bulls want to see big bullish volume come in and push PayPal up above the eight-day EMA, which may give the stock the power it requires to regain the $218.72 mark. Above the level, there is resistance at $225 and $232.63.
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Bears want to see big bearish volume come in and drop PayPal back down below a support level at $213.07. Below the area, there is a key support at $210.56.
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