Paypal may be a friend again - Exit

With friends like these who needs enemies? The Jan 220/230 Call option spread expired today. The Butterfly pattern never took flight. No pattern I know of has a 100% win rate, and I've heard the same from experts many times. So, we just have to brush it off and find the next pattern.

Summary:

Entered: Jan 220/230 Call option spread for .63 on 11/30/21.

Expired: .00 on 1/21/22

Net $-63.00 loss. This is why you don't cost average on losing positions. If I went solely with a conviction this would work out, then I might have added more long positions as the stock made new lows. Thank goodness I've learned not to do that.

Paypal may be a friend again - Update 12

There goes yesterday's joy. Today we formed a Bearish Engulfing candlestick pattern. But we also gapped up at the Open, and didn't close below the 8ema. So, no real damage done.

We're still chopping around in this consolidation. Have to remain patient and continue monitoring.

Paypal may be a friend again - Update 11

Today's price action doesn't look like much, but there's something happening here that could be meaningful. Take a good look at today's green candle and the previous trading day's red candle.

Today's candle opened well above the previous candle's close. Then we climbed and closed above the recent congestion. Technically we didn't form a Trend Kicker but we came close to it. We are also approaching the break out level of a Fry Pan Bottom candlestick pattern.

In addition, the Bollinger Bands have pulled inside the Keltner Channel, setting up the possibility of  a BB/KC Squeeze breakout.

These indications, plus Stochastics still in the mid-range, are encouraging to our long thesis.

Paypal may be a friend again - Update 10

We've been just chopping around in a consolidation. We're still above the 2 Fibonacci levels that have been providing support for weeks.

There has been no news and won't be any real news until we either break out of this consolidation to the upside, as I expect we will, or to the downside.

Paypal may be a friend again - Update 9

More chop, but today its in our favor. We closed over the 8ema and above the 161.8% Fibonacci of the green range. We also closed at the top of today's candle.  The ADX crossed again, but at this point its useless because it keeps crossing back and forth in this chop.

It'll take 2 or 3 trading days of green candles to know if we're breaking out of this congestion. So, we're holding our bullish position and keeping our eyes open.

Paypal may be a friend again - Update 7

The last sentence of yesterday's post was "We'll want a higher high and higher low again, but what we really want is to close near the high of the day.". Well, we didn't get a higher or a higher low, but we did close near the high of the day.

We're still higher than the recent swing low at 179.15, above the 161.8% Fibonacci extension of the yellow range, and very close to the 8ema.

So, it wasn't a constructive day but it didn't break our conviction in this trade either. We're kind of chopping around down here. My expectation is that we're building a bottom from which to go much higher. But technically we're a bit at risk of heading lower.

Paypal may be a friend again - Update 6

Today's red candle looks bad but what we see is actually still bullish. Yesterday we closed above the 8ema and the 20sma. Today we gapped up at the opening. If Stochastics were overbought, then a gap up could be an "Exhaustion Gap", and that could be bearish. But Stochastics are in the mid-range, so a gap up is bullish.

We did retrace back down to close the gap, but like I explained in a previous post in this thread, that will relieve us of any "Gap Pressure". So, it can be a good thing. Of course, we can continue down and hit our Stop, but we don't need to worry about that today.

Notice the ADX DI+ crossed back up over the DI-. That's a bullish sign. And we didn't close below the 8ema or 20sma. In fact, today's Close is sitting right on them. This could be seen as support. Which would imply we'll head back up tomorrow.

Also, notice yesterday's candle made a higher low and a higher high than the day before. And we did the same thing today. This is bullish for continuing our uptrend.

Tomorrow could be an important day for our price action. We'll want a higher high and higher low again, but what we really want is to close near the high of the day.

Paypal may be a friend again - Update 5

Every equity index was down at the 16:00 ET close today. If you average out the percentages its about .5% down. Meanwhile Paypal closed about .5% up. That's Bullish relative strength.

We're still under the 8ema, and every other Moving Average on the Daily chart above, so we're not out of the woods yet. We didn't form a candlestick pattern but we did make a green candle and closed over the 161.8% Fibonacci extension on both the green and yellow ranges.

If we continue upward from here, we'll be making a higher low, which is Bullish. We could even form a Bullish Inverted Head and Shoulders pattern, but I'm getting ahead of myself.

For now, I think the best decision is to hold our Bullish position.

Paypal may be a friend again - Update 4

On today's Daily chart at the top, you can see we're still above the Butterfly D3 point, still above the 161.8% Fibonacci extensions of both the green and yellow ranges (see previous posts for a wider view of the Daily chart where you can see the ranges), formed a Doji candle which represents indecision, and closed very close to the 8ema. These are indications the current down leg has insignificant momentum.

On the Daily chart on the bottom, we zoom in to show that we closed the Gap. Now that the Gap is closed, we no longer have what I like to call "Gap Pressure", which means there's an attraction to price to reverse and fill in a gap. So now, with the gap filled, price is free to resume the uptrend.

The expectation from here is to reverse direction, go up and penetrate the 20sma (thick green curvy line). and continue up to fill the next gap, which is from 226.25 (11/8/21) - 215.97 (11/16/21). We'll probably get a temporary rejection and drop after filling that gap because in addition to the gap is the 50sma, which is currently in the gap (thick red curvy line).

After that, we can continue upward to our target of 260, which is the .618AD3 retracement.

Paypal may be a friend again - Update 3

The daily chart above looks weak. We bounced off the 20sma, closed below the 8ema, and the ADX crossed back to a negative condition. Bearishness.

However, we just closed the gap from 12/6/21 - 12/7/21. We never went lower than the 161.8% extension of the green range. Stochastics are not overbought. And, while we did close under the 8ema, we closed very near it. Also, we haven't seen confirmation that we're going lower by the next candle, which of course is because it hasn't formed yet lol.

Given the above, its a difficult call to make, whether to hold or exit. Some doubt is introduced by suspecting I'm just avoiding taking a loss, which is a real psychological bias traders have to fight. But being a Friday, and having only a small amount of potential loss, I decided to hold the position because we wouldn't want to miss a gap up and run to the upside on Monday when we don't have a convincing case today either way.

It may seem ridiculous to do this analysis and struggle with a decision when there is so little capital at risk on this trade. But there are two things you need to consider. One is I may be documenting my trades with only a proportional fraction of my actual position. But more importantly, good trading is far more about process than outcome. There isn't anyone in the world who is saying their trading methodology has a 100% win rate. So occasional, or even frequent, losses are guaranteed, even with the best trading system you can find.

Becoming a profitable trader is about finding a system that has a positive expectancy and having the discipline to follow the rules of that system on every single trade. Making or losing money on any one trade doesn't matter. What matters is proving your system has an edge, and continually improving your execution. Follow a proven system and you'll make money over time. Process over outcome.

So, no matter how much or how little I have at risk, I analyze every trade with equal conscientiousness. Or at least that's my goal.

Paypal may be a friend again - Update 2

Nothing changed for our bullish position today. It looks like we got a Bearish Harami candlestick pattern, but yesterday's Open was 191.95 and today's Close was 191.75, so that's not a valid pattern. Also, we closed over the 8ema.

I think we just gave some respect to the 20sma but as of today's trading, its inconsequential. So, we held our position.

Tomorrow morning at 8:30am ET we get the monthly US CPI (Consumer Price Index) report. That's rated as a High Impact report and will likely move the markets one way or another, if its not close to the expected number, which is .7% for CPI and .5% for Core CPI. 

I considered getting a hedge or even exiting the position today, before the report comes out, but decided not to because of 2 reasons:

I think its very likely to be higher than expected. If so, I'd expect that to be bullish for PYPL because in inflationary times, consumers spend their money faster since their purchasing power is eroding quickly. And it seems very unlikely we'll get a low inflation number.

If the report comes out as expected, then it will have no effect on stocks and we can follow our Technical Analysis, which says its not yet time to sell.

Paypal may be a friend again - Update 1

Above is a Daily chart of how we closed the day. Notice we closed above the 20sma (thick, green, curvy line). We haven't cleared it very much, and tomorrow we could reverse, but for now its looking good. We also got our ADX bullish cross and Stochastics are still low.

Given these things, and the discussion in my previous post, we're on our way to a nice trade. You can see the targets in the comment box on the chart. Our target is the .618AD3 retracement at 260.11.

Paypal may be a friend again

After a lengthy sell-off, Paypal (PYPL) may have turned the corner. The daily chart above shows how a perfectly formed Gartley pattern turned into a Butterfly. We're bouncing off the 161.8% Fibonacci extension on both the green and yellow ranges. The previous 2 candles show a Doji Gap Up candlestick pattern and a close over the 8ema. Today we see a continuation of an up swing, but the day's only half over. It also looks like the ADX DI+ is crossing over the DI-. And Stochastics is still low. All this is Bullish.

However, price is currently up against the 20sma on the Daily chart. It could easily reject off this level and head back down. So this is a critical inflection point. It'll be important to see if we cut through the 20sma and continue upward, or make new lows.

I took a flyer (high risk trade) on PYPL and got a Jan 220/230 Call spread on 11/30/21 for $0.63. It currently (12/8/21 12:53 ET) has a Bid/Ask spread of 1.08/1.18. I'll be looking to add to this position if we continue on a good trajectory.