EBAY Approaching Support...Will It Hold?

One of the indicators I like to use is the Accumulation/Distribution study. In my opinion this indicator is more accurate than the On Balance Volume (OBV) indicator that is so popular with many traders. The difference between the two indicators is in the way volume is added or subtracted from the running cumulative total.

On Balance volume will show a positive reading if today's close is greater than yesterday's close. The Accumulation/Distribution study compares today's close within today's range. So if the stock closes on its low but it is still up when compared to yesterday's close, acc/dist will show a negative value not a positive value like OBV would show.

Think about it...if a stock opens up 10 dollars but closes up only 1 dollar that means the stock sold off 9 dollars from the open. OBV will show a positive value but Acc/Dist will show a negative value which to me is the more accurate reading.

Above is a chart of EBAY. Notice how the stock is approaching a major uptrend line which has been in force since last August. Notice in the lower pane the accumulation/distribution study. This indicator is literally falling out of bed and diverging from the price chart which to me means EBAY is likely to fall in the coming weeks. In my opinion this stock will most likely break its trend line and head lower. As usual, we'll see what happens.