US payment systems company Paypal is due to report Q2 earnings today and, on the back of 5 consecutive quarters of earnings growth, traders are keen to see if the company can make that 6. On the numbers front, the market is looking for EPS of $1.154 on revenues of $7.274 billion. If seen, this will mark an increase on the prior quarter’s results and should help underpin the stock near-term.

Risk Aversion Weighing on Stocks

However, the bigger issue currently is the broader risk off move we’re seeing. On the back of some weaker-than-forecast US data yesterday and a credit ratings downgrade from Fitch, US stocks have come under heavy selling pressure as traders move capital into defensive positions. Against this backdrop, if Paypal results come in weaker than expected this might fuel a sharp unwinding of the stock, particularly given that Payapl shares are already trading lower ahead of the open today.

Technical Views

Shares in Paypal have recently broken out above the bearish trend line from last year’s highs but are still sitting below the 78.19 level for now. This is a major resistance zone for the stock and bulls will need to see a break higher here to prevent a fresh rotation lower. If we do turn lower from that level, 67.41 is the key support area to watch.  To the topside, a break of 78.19 will open the way for a move up to 87.93 thereafter. 

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