PayPal (PYPL) stock is getting hammered on Wednesday, with shares down 26.6% at the session low.
Sadly for the bulls, these deep declines are nothing new, as this stock has been getting pulverized for months.
The Nasdaq has been bouncing hard over the past few days, which has allowed PayPal stock to bounce too. However, earnings were just too disappointing to keep that rally alive.
Revenues were mostly inline and earnings of $1.11 a share were a penny shy of expectations. Guidance was the real problem though, as management’s outlook for 2022 disappointed investors.
While both stocks are fading from the highs a bit, PayPal’s plunge is particularly disappointing as Alphabet (GOOGL) (GOOG) hits new all-time highs on earnings and as Advanced Micro Devices (AMD) climbs higher following its quarterly report.
That all said, there are some reasons to be looking at PayPal right here, right now.
Trading PayPal Stock
Chart courtesy of TrendSpider.com
PayPal stock has been decimated and for longs it has not been a fun ride. At today’s low, shares were down a whopping 58.5% from the highs.
Shares have sliced through most meaningful support levels and moving averages, too.
Aside from not seeming to deserve a 25% haircut today, there are some things that are catching my eye.
Specifically, I’m looking at the gap-fill down at $129.59, as well as the 21-quarter moving average. The latter is not especially well followed, but it’s hard to deny that it comes into play at an “intersection of interest.”
I don’t think it’s completely crazy to think about accumulating a small, longer-term position near current levels. Investors can consider using a $10 to $15 stop-loss on a daily closing basis.
From the $130 level, that’s somewhere in the $115 to $120 area, depending on how much risk investors want to leave on the table.
However, even a rally back to the January low and the 50-month moving average near $150 gives a 2-to-1 or 3-to-1 risk/reward ratio (depending on what risk level is chosen).
A full gap-fill back would put $170 back on the table and if investors are truly in it for the long-term, a move back over $200 shouldn’t be out of the question once the selling dies down.
Is this a perfect stock? Absolutely not.
Is buying now taking a chance? Yes (it always is). However, there are some areas of interest here and if PayPal can find a low and push higher, we could be looking at some nice gains here.
