Government Targets Online Retailers; I Target New Trade

Posted: Oct 10, 2011 12:01 AM

Looking for trades during a distraught market, I bought Ebay at $28.80 in mid-August and sold at $33.50 in mid-September. 

New government action has given me another cut at the same stock.   

So, here’s my next Ebay trade:

The stock’s at $31.07.  It’s been trading between $27 and $34 since it broke out of a trading range last October.  But the trading range is predictable, the company is healthy — with earnings per share (EPS) projected to grow 55% between FY2010 and FY2013 — and the market as a whole is stuck at support levels, which means EBAY will probably do more of this stagnant trading.

After travelling upwards in mid-Sept., the stock spiked down to a closing low of $28.11 on Oct. 3. Stocks rarely spike downward just once, but they often spike down exactly twice, then rebound.  My aim will be to buy it on the downward spike and sell it on the rebound.

The market is a little worried about the proposed tax on internet retailers such as Ebay.

After almost twenty years, a 1992 Supreme Court decision (Quill Corp. v. North Dakota (504 U.S. 298)) that clarified that states cannot force catalog companies and Internet retailers to collect sales tax unless they have an in-state physical presence may be changed if Congress passes a proposed bill called the Main Street Fairness Act (MSFA)).

NYC based Founder Todd Morris states, “This proposal targets "Main Street" small businesses that cannot afford to comply with the overly complex sales tax laws that change from town to town and month to month. It was drafted by the largest international corporations that use legal loopholes to pay much lower corporate taxes than real "Main Street" small businesses. A true main street fairness plan must create a simple flat sales tax that does not require an army of expensive CPAs to comply with.” (also known as (OSTK)) President Jonathan Johnson says the name of the bill is ironic because it is the handiwork of big-box retailers working to eliminate a growing group of Main Street businesses vital to the economy: small online retailers.

The concern has created a trading opportunity for me. 

I can now put in a buy at $28.50 and the sell order will go in at $33.25. If I lose 1% to trading costs, that will leave me 15% profit in the short term.

Happy trading!

Price And Volume
Chart for (: )
1 Week
1 Month
3 Month
1 Year
Compare to:
Volume 13,406,724
Open 31.29
Bid (Size) 31.07 (500)
Ask (Size) 31.08 (7600)
Prev. Close 31.44
Today's Range 30.75 - 31.52
52wk Range 24.08 - 35.35
Shares Outstanding 1,288,759,170
Morningstar Profile
Full Profile
eBay, Inc.
Exchange Traded NQ
Market Cap 40.04B
Related Companies WMMVY 0HAB TGT COST

John Ransom | Create Your Badge

Twitter!/bamransom -See more top stories from Townhall Finance. New Homepage, more content. Be the best informed fiscal conservative.