Shares of Paypal Holdings Inc (NASDAQ: PYPL ) are higher my a little over 9% for the year and holding a nice up-trend from 2017. Through the lens of a simple trend following strategy, PYPL stock now also has a well-defined upside target for active investors and traders to take advantage of upon a breakout move. Put this stock on your radar now!
Too often traders randomly get into trades without any plan, much less a well-defined upside target or stop-loss level. This type of random fumbling around the market is a recipe for disaster.
In this here daily column of mine, the trade ideas I offer are always based on both a clearly defined stop-loss area as well as clear upside targets - and today's trade idea in PYPL is no exception to this.
PayPal Stock Charts
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Moving averages legend: red - 200 week, blue - 100 week, yellow - 50 week
On the weekly chart, we see that the steep 2017 rally of PYPL stock took place in a well-defined up-trending channel. During the late-January/early-February 2018 broader stock market dip the stock largely held this channel.
This chart alone helps trend followers to manage risk - a stop-out would be called for upon a push-and-hold below the February lows, at least from a simple trend-following perspective. Trend followers at this point on the upside are hoping for a move back higher to the upper end of this trading range as a profit target.
Click to Enlarge
Moving averages legend: red - 200 day, blue - 100 day, yellow - 50 day
On the daily chart we see that PayPal stock gapped lower on Feb. 1 following the prior day's earnings report. This gap to this date remains unfilled. Technical analysis 101 often calls for these so called "gaps" on the charts to fill, i.e. in this case for the stock to gravitate higher back to the daily closing price from Jan. 31 around the $85 area. While certainly not all gaps fill over time, this particular one for PYPL stock looks probable.
So, a simple trade setup here would trigger if and when PYPL stock pushes and holds above the $81 level on a daily closing basis. At that point a next upside target becomes the $85 area. Any meaningful one-day bearish reversal from there would be a stop loss signal.
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