eBay (EBAY)
(5/21/07)

Much as I love eBay as a user, I think there's a near-term shorting opportunity here, and perhaps longer. 

As the monthly chart suggests, we're counting the decline from its (after several splits) all-time high of 59 as an unfinished double zigzag.  The low of 22.83 last August was a .618 retracement of the stock's bull run, but as the weekly chart suggests, the rise is countable correctively, which makes it unlikely that the August 2006 bottom ended its overall bear market correction.  Since we have 7-waves up, the pattern is better counted as an X wave advance.  Once again, X waves join two legs of a combination pattern, like a double zigzag.  The only possible bullish take on the action would be to count the rise from last August as a leading diagonal triangle, but even here, a tradable pullback should still develop.  While the rise to the stock's 35.41 (not 35.51) high of April already has Waves A and C perfectly related by .618, we still can't rule a possible retest of the high.  However, there is massive sentiment-based resistance at the 35 area, and 36.72 represents the .382 retracement of the first leg of the zigzag, both reasons why the stock has struggled when testing above 35.  That said, we'd want to see the 32 area completely taken out, since it too is both Fibonacci support and trendline support.  As for positioning choices, one could risk a break of 32, though a more conservative entry might await a break of some Fibo support at 30.  If the double zigzag scenario is correct, then it should ultimately lead to a retest of the August low at the 22 area, with a possible bounce then following, as the monthly chart suggests.  The last Wave (C) could still draw the stock towards the 14-16 area.  Of course, this would all take a number of months to play out.  Lastly, if the leading diagonal (i.e., more bullish) count is applicable, then we'd still look for moves to the 27 or 25 areas.

Options are always advisable for shorts, and for an initial option play, you can consider the October 2007 $35 Put (symbol XBAVG), currently selling for $3.80 with the Delta at 0.56.  

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