How Will PayPal Trade After Q2 Earnings? What The Stock Chart Says

As second-quarter earnings season reaches its midpoint, it has yet to be determined whether issues in the growth technology sector have found a long-term bottom. So far, it has been a mixed bag with several to still report.

One of those companies is PayPal Holdings Inc. PYPL, which is due to report before the opening of Tuesday’s session.

The price action in the issue leading up to the report makes it the PreMarket Prep Stock of the Day.

Double Top On PayPal's Monthly Chart: PayPal gave investors two opportunities to exit the issue over $300. The first one was in February 2021, when it peaked at $309.14. Following a swift decline the following month to $223.09, it had a sustained rebound.

That rally lasted until July 2021, when the issue made its ultimate all-time high at $310.16. It faded to end that month at $275.53 and was not unable to get back to $300 before embarking its steep decline.

Where Is The PayPal Bottom? Following the July peak last year, the issue traded lower in eight of the next 11 months ending in June. Much of the damage was made in two of the monthly declines. The first one was in November ($232.59 to $184.89). The other one was in February when it swooned from $171.94 to $111.93.

PayPal Finds A Home In Double Digits: Following such a precipitous decline, the issue finally found an area that appealed to the bulls. For simplicity's sake, let's call it $70.

To begin with, the issue had a sharp rebound off its May low ($71.83). It faltered in June to make the ultimate low for the move at $67.58 and revisited that area in July when it bottomed at $68.51.

Adding significance to the $70 area: that level is where the issue bottomed in May 2018 on its way to modest gains in 2018 and 2019 and a massive rally off its COVID-19 low.

The issue more than participated in the July rally, moving up from the July 14 low to end the month at $86.53. That makes for a gain of $16.69 or 23.9%. That was more than double the S&P 500 cash index advance of 9%.

PayPal Moving Forward: As of 1 p.m. EST Monday, Paypal has made a new high for the rebound, so far-reaching $89.21, and is not far off that level. While there are scattered highs just above and below $90 since early May, a more significant area of potential resistance may be the $92.50 area.

The reason is the issue has three consecutive daily highs between $92.25-$92.85 on May 3-5. 

That level is where the issue began its final descent to the low for the move.

PayPal's Expected Move: At this time, market makers are pricing in a $9 move based on the combination of the weekly calls and puts at the $88 level. The official price of the expected move will be determined by the closing price and the nearest whole number.
Based on the $9 straddle price and the closing price of $88, the expected move to the upside may be capped at the aforementioned resistance level, $92.50. On the downside, the expected move is pegging potential support at the $83.50 area. That only coincides with one daily low from last Thursday at $83.35.

A big beat or big miss may send the issue well beyond the expected parameters.

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