Forget GameStop, Here's a More Interesting Opportunity for Traders
A rotation away from stretched tech stocks this summer would make sense. This is what to watch from a once dominant player and beaten-down stock.
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How long until CNBC anoints Roaring Kitty the next Warren Buffett?
The news of his livestream later Friday must have been mentioned a half-dozen times or more Thursday. Forget about jobs, inflation, interest rates, or the economy. Roaring Kitty and his GameStop GME position dominate the news cycle. Nvidia NVDA perma-bulls must be dying a little on the inside, losing the spotlight for a day or two.
It’s no secret that tech has led this market. Granted, a concentration of names has pushed the overall indexes higher, but some of the best performers appear stretched. It stands to reason that we may see some rotation this summer. PayPal PYPL, once a dominant player in the digital payments space, has an interesting look to it on the weekly chart.
The stock traded above $300 in the fall of 2021, but a disastrous fourth quarter, followed by an even worse first half of 2022, has cratered the stock. For the past 18 months, the shares have been stuck under $100. Even $80 has been a struggle since February 2023, but the recent trading range offers some hope to the bulls.
The daily chart has a bit of noise on it, so I pulled my view back to the weekly price action. PayPal has enjoyed a series of higher lows since October 2023. During that same time, it also saw a series of lower highs, creating a clear wedge pattern. Given the numerous touches on both trendlines of the pattern, PayPal offers traders evident breakout and breakdown levels.
If the stock closes under $62 on a weekly basis, I see it trading back to $56, possibly as low as $50. I’m not really looking to short, so my focus is on the breakout level of $70. Above $70 and PayPal has a clear path to $80. I could even see it going as high as $92. An open gap at $73 should get filled quickly on a breakout, but it might also cause some short-term resistance in the $73 to $75 range; however, bulls should be able to push through that within a few days based on momentum.
At the time of publication, Byrne had no positions in any securities mentioned.
