One of the more perplexing situations in today's option skews scan is eBay Inc (EBAY). The
buy-to-open data from the International Securities Exchange showed calls were snapped up at nearly twice the pace of puts. What is troublesome is that this optimism follows headlines such as this one from Reuters - EBay warns on end of year and beyond, shares down - that discusses the company's disappointing forecast.
Regular readers may note that I have been voicing some concerns on eBay for some time. If you haven't been following this string and want to see how the situation has played out, the links below hit the highlights...
Since the end of June, the stock has lost more than 40%. Yet, according to Zacks, 10 of 20 analysts still rank the stock with a "buy" rating. That, combined with the call buying noted above, suggests many are still hoping for a come back.
If we look to the weekly chart below, we see that the stock is showing an intermediate-term oversold condition. In fact, this is the most oversold the stock has been in the last 3 years. That does set the stage for a technical bounce but, given the optimism, I would not expect it to be much more than that. The former support near 25 now looms as overhead resistance. I would look for an oversold bounce to run into trouble there.
Chart Courtesy of Thomson Financial
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