PayPal (PYPL): Ready for a pullback after hitting wave (iii)

21 Okt

Plan the trade and trade the plan.

That’s exactly what we’ve done with PayPal. In our last update a month ago, we stated: “We are going to take more profits once we are getting into the $81 area,” and now, we’ve done just that as PYPL has reached the minimum target for Wave (iii) at $81. With the position now up 37%, we see more upside potential, but a pullback here could offer a prime second entry spot.

Several factors are aligning in the chart, reinforcing our conviction for a good re-entry. First, we are seeing a bearish RSI divergence, suggesting a more significant drop than the minor one we've already seen. Ideally, we’d like to see the price dip below the last level before the low-volume node at $76. A low-volume node represents an area of little trading activity, which means the price tends to move quickly through these zones in the future.

As for the entry, two key levels stand out to us. The high of the recent accumulation phase before the last leg up and the low of the same range, which aligns with the level of Wave (i). In theory, this level should not be breached. While we don’t strictly adhere to Elliott Wave theory, we prefer not to see the stock close below this level for an extended period. A wick below or consolidation around this zone would be valid for us. Additionally, the 38.2% Fibonacci retracement level sits in the middle of this accumulation phase, making it our targeted entry for Wave 4. Therefore, the level between $72.78 and $70.62 seems ideal for a re-entry.

Given the upcoming election, it would be safer to play this setup with a wider stop-loss or soft stop-loss (manual stop-loss) to account for potential volatility or sudden price wicks.

At the moment, we haven’t set a limit order but have activated alerts. Once the price dips below $76, we will activate our limit order and get ready for the next leg up. 🔥