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TECHNICAL ANALYSIS: PAYPAL

June 16, 2024
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Swing Trading Strategy

Those who know me, will know that I am always in one or two Swing Trades at any given point in time.

 

Swing trading is a style of trading that attempts to capture short- to medium-term gains in a stock over a period of a few days to several weeks. Swing traders primarily use technical analysis to look for trading opportunities. Swing traders (like myself) also utilize fundamental analysis in addition to analysing price trends and patterns.

 

My approach to Swing Trading is very simple.

 

TIME PERIOD

I never set a time-limit on my swing trades. If they take a few days, thats great. If they take a few months, I am also fine with that. Price has memory and will always do what it can to return to the memory price. Patience is your friend in Trading.

 

I use the 50- and 100-Day Moving Averages for my Swing Trades. That is memory price.

 

If you want to double-check yourself, add the RSI Indicator. An RSI under 30 means a stock is being dumped without valid reasons. PayPal RSI is currently 29. When I go extremely conservative I wait for an RSI under 20.

 

WE DO NOT BUY COMPANIES WE DONT UNDERSTAND

This is my golden rule. I need to know the business I am planning to swing. I must understand what moves the share price.

 

I also look at the financials. I have attached PayPals Income Statement.

 

Revenues

2018: $15 billion

2021: $25 billion (up 67%)

 

Profits

2018: $2 billion

2021: $4 billion (up 100%)

 

Does it make sense that PayPal is trading at the exact same price as in 2018 with this growth?

 

VALUATION

Last, I look at the Valuation. In the attached you can see PayPal is trading at 3 times Sales and 21 times Earnings. We compare PayPal to its peers. MasterCard is at 15 times Sales and 34 times Earnings. I know a bargain when I see one.

 

STOP LOSSES & TAKE-PROFITS

I do not enter trades I do not believe I can make a 50% gain on. If the Risk:Reward is lower than 50%, I move to the next trade.

 

Stop-Loss is always 10% below my entry price. If the trade goes against me, I can never lose more than 10%. Therefore, my entry is critical. I need that RSI as low as possible. If a trade goes against you, do not revenge trade. Move to the next trade. It happens.

 

Combining TA & FA is a superpower.

 

Happy Trading to the Charters!!! Be safe out there.


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