Will an Extended PayPal Correct Lower From Here? - TheStreet

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PayPal Holdings Inc. (PYPL) represents new forms of digital payments and was noted by Jim Cramer during Monday's Mad Money program. PYPL has soared from its March low and has nearly doubled in price. Prices are extended above the popular moving averages so it is fair to ask whether PYPL could be vulnerable to a correction.

Let's check out some charts.  

In this daily bar chart of PYPL, below, we can see a number of short-term clues that suggest we could have a pullback. We mentioned that prices are extended above the moving averages that are designed to smooth out the price action. When prices get too far away from the 200-day moving average line there can sometimes be a movement back toward the line.

The trading volume has not expanded on the recent rally and that is not what old-time chart readers like to see. The daily On-Balance-Volume (OBV) line has been moving sideways since early May and that suggests we are seeing a balance between buyers and sellers.

The 12-day price momentum study in the lower panel shows lower momentum peaks from May into June and that is a bearish divergence when compared to the price action, which has made higher highs in the same time period. 

 

In the weekly bar chart of PYPL, below, we see a mixed picture. Prices are above the rising 40-week moving average line but I think too far above the line. The weekly OBV line has made a new high for the move up and supports the rally.

The slow stochastic indicator in the lower panel is an overbought/oversold indicator that is very overbought. Overbought readers can be alleviated by a downward correction and by sideways price action.  

 

In this daily Point and Figure chart of PYPL, below, we can see that prices are well above a price target of $136. 

Bottom-line strategy: Extended charts may be vulnerable to corrections but that does not mean it will happen. Some of the biggest and most important breakouts I can remember have come when a stock or index is overbought. Consider this a head's up notice.

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"correct" - Google News
June 10, 2020 at 12:49AM
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Will an Extended PayPal Correct Lower From Here? - TheStreet
"correct" - Google News
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