“Sell in May and go away.”
The market hit another record on May 1. Not a bad way to start the month.
But I’m keeping the age-old saying in my mind this week…
With the SPY stretched more than 3 ATRs (Average True Range) over its norm, that phrase deserves some respect. We’ll see if the bears finally show up to collect.
But in reality, today’s biggest story has nothing to do with the indexes.
Ryan Cohen, a meme-stock king, just made a $55 billion takeover bid for a huge household name.
The stock popped 8% as a result and made new all-time highs as well.
I’m wary of the bullish momentum in May, unless it has a $55 billion catalyst…
eBay Inc. (NASDAQ: EBAY)
Cohen’s GameStop Corporation (NYSE: GME) started quietly accumulating EBAY shares back in February. The company now holds a 5% stake.
The formal bid came out on Monday, May 4: $125 per share in cash and stock, with a total equity value around $55 billion.
The pitch centers on converting GME’s approximately 1,600 U.S. retail stores into drop-off and shipping hubs for eBay products, with Cohen promising $2 billion in annualized cost cuts within a year of closing. He’d serve as CEO of the combined company, compensated only on performance.
EBAY spiked more than 8% in premarket. GME slid more than 3%. That’s standard acquisition math. The target pops, the acquirer takes the hit.
What The Charts Are Showing Me
Here’s where it gets interesting…
EBAY wasn’t broken before this news. The year-long chart shows a stock in a clear uptrend, grinding from the mid-$70s last summer, consolidating through the fall, then pushing steadily toward the $100–$105 range heading into May.
This isn’t a beaten-down stock getting a lifeline. Cohen targeted a stock that’s already showing strength.
Then look at the intraday reaction today. EBAY gapped up hard at the open and spiked all the way to approximately $120 before sellers showed up. Then the stock faded and is now trading around $109. That’s a $10 giveback from the morning high.
That kind of move: gap up, spike, fade, is exactly the pattern I want for post-catalyst trades.
The first move almost always overshoots. The real opportunity comes when the dust settles, and the stock finds its footing at a level worth respecting.
The $104–$105 zone is where EBAY was trading before the news hit. That becomes the line in the sand. If the stock pulls back and holds there, that’s a setup worth watching.
If it breaks below that level and can’t recover, the market is telling you something about how seriously it takes this deal.
A Word On GME
If you’ve been around markets since 2021, you already know what GME is capable of. The stock went from under $5 to nearly $120 in a matter of weeks during the original short squeeze.
It’s been erratic ever since.
- Big spikes
- Sharp pullbacks
- Long sideways stretches
The long-term chart looks like a seismograph.
That volatility cuts both ways.
GME can move violently on momentum alone, with or without a fundamental reason. Add a $56 billion acquisition announcement into the mix, and you have the ingredients for another wild ride.
GME was down on the news. That’s worth noting. The market isn’t immediately rewarding the acquirer.
Whether that reverses depends on how the deal develops and how retail traders respond to Cohen’s latest move.
My Trading Plan
I’m not chasing either of these names into the open. That window has passed.
What I’m watching now:
- Does EBAY find support in the $104–$105 range or higher? If it holds with clean price action, that’s a potential entry point for a trade back toward the highs.
- Does GME stabilize and form a base, or does the selling continue? A stock that absorbs bad news and stops going down is one worth watching closely.
- Are there sympathy plays in the e-commerce or retail shipping space reacting to this news? Or other meme-stock movers? Sometimes the cleanest trade isn’t the stock that made the headline.
Patient people take money from impatient people. The traders who chased EBAY to $120 yesterday morning already learned that lesson.
The next setup will either confirm a trade or it won’t.
Execute with a plan when it shows up.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
