Bearish Traders Could Drive eBay Stock Higher

The online resale platform has had an impressive year already

Feb 27, 2018 at 10:28 AM
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Shares of eBay Inc (NASDAQ:EBAY) have been on a tear, recently gapping above a trendline connecting higher highs since early 2017. This level coincides with the shares' rising 20-day moving average, which has acted as support since early December. Considering all this, the stock looks poised to add to its 15% year-to-date gain.

WKEND ebay chart

Despite EBAY's technical strength, short sellers have continued to target it. Short interest has more than doubled since June, and now represents more than three times EBAY's average daily trading volume. With the stock rallying in the face of this selling pressure, short sellers may be forced to cover their positions. A capitulation by these remaining bears could send EBAY sharply higher.

There is also plenty of room aboard the bullish bandwagon for analysts, as 16 out of the 27 brokerages covering EBAY stock rate it a "hold" or "strong sell." A round of upgrades could lure more buyers to the table.

Meanwhile, it's a good time to speculate on EBAY with short-term options. That is, the stock has a Schaeffer's Volatility Index (SVI) of 23%, which sits just 17 percentage points from a 52-week low, hinting at lower-than-usual volatility expectations for near-term contracts.

Subscribers to Schaeffer's Weekend Trader Alert options recommendation service received this EBAY commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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