Swing Trading eBay for Fun and Profit

Jan 21, 2009: 12:22 PM CST

eBay.com is perhaps the #1 auction website out there and one would think people would turn to eBay during hard economic times to find good bargains on virtually anything, but their stock is telling us a different story.  Let’s take a look at the daily and weekly chart of eBay and then see a video released by Adam Hewison that describes how one might profit from swing trading eBay using the Market Club system.

eBay Weekly Chart:

We see the stock peaked with the market in October 2007 and has been in a steady downtrend ever since with only a few meaningful retracement swings back into resistance (a good place to get short again).

The first opportunity was when price formed a flag into confluence resistance just before 2008 began (red arrow).  That provided a low-risk opportunity to establish a swing position short and perhaps play for a ‘measured move’ swing of the flag which got its target.  Price then formed a counterswing into April 08 which breached by ultimately failed to hold the 20 or 50 week EMAs.  Price has made narrow corrective swings on its way to new lows beneath $12 per share.  The daily chart gives a closer picture of the current structure.

eBay Daily Chart:

We see a multi-swing positive momentum divergence that has been in place since October 2008, though price has not completed a reversal and is currently failing at the 20 and 50 day EMA with the key moving averages in the most bearish orientation possible.  A test of the $11 lows seems to be the highest probability play.

Switching gears to objective trades in eBay, Adam released an education video comically titled “Trading eBay… Sure Beats Selling Your Stuff!” in which he takes us through an overview of the Market Club “Trade Triangle” strategy of setting up the larger picture (trend) and then trading signals on the shorter time frames, a discipline which can be quite helpful to newer traders.   If anything, the method is a structured, trend-following approach which can be of value to beginners.

Corey Rosenbloom
Afraid to Trade.com

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