Back on March 26th I wrote this blog post discussing a pair trade of going long Mercadolibre and short Ebay. They are similar businesses, with MELI often seen as the Ebay/Amazon of South America.
With earnings now out of the way for both, the pair trade idea is actually all the more pronounced. The first chart, below, shows Ebay’s daily timeframe is vulnerable to a head and shoulders topping pattern if buyers cannot reclaim $57 with force, especially given Ebay’s prior steep uptrend for quarters on end.
Next, Mercadolibre is working through a high and tight consolidation, or bull flag, holding its earnings gap higher. When you see a powerful gap higher hold without wild price swings, it tends to indicate that the market is coming to terms with the newfound price levels in an orderly manner, even setting up to push higher yet. I would look at $123 as an upside trigger.
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@Chess, any thoughts on the chart of MOS? False breakout? Or are we going to test the trendline from the Jan. and March highs and then off to the races? Thanks in advance!
I don’t like seeing that type of immediate giveback after a breakout but sell volume is light so far yesterday and today. I’d let it play out and see if $62 holds next week with buyers coming back in.