The world is still trying to snap out of the whirlwind that the pandemic brought about. Aside from the human tragedy, there were good things that came out of it. One of those is the proliferation of electronic payment transactions. Lockdowns lit a fire under efforts to make assets more nimble. Stocks like PayPal (NASDAQ:PYPL) skyrocketed after the initial March 2020 crash. PYPL stock recovered quickly, and by May of that year it took a second leg higher.

At the peak, PYPL stock had tacked on another 150% rally from the pre-pandemic levels.

Unfortunately the effort double-topped last summer and it’s been downhill since. It has so far lost 50% of its value, almost in a straight shot.

The good news is that almost the entire rally has vanished, thereby leaving very little froth to shed from here. My long-term prognosis for PYPL stock is positive as long as the indices remain bullish. Investors must also accept the fact that there will be negative stints along the way. Therefore, for the next two weeks resist calling absolute bottoms.

This is not the time to add risk to existing positions. The practice of averaging down merely makes our problems bigger. However, investors who are looking to initiate new ones can do so partially. Smart money must not have extreme confidence in their thesis regardless of the quality of the stock.

PYPL Stock Performance Metrics Are Strong

PayPal generates incredible returns, so there is little doubt about its success. Management has posted impressive financial metrics that support my claim. Revenues, gross profit and net income have at least doubled in five years. Meanwhile, its valuation has not become a problem along the way. PYPL stock price to earnings ratio of 38, while not dirt cheap, is still reasonable. There are no signs of bloat among its peers.

Moreover, the company generates almost $6 billion in cash flow from its operations. This gives management freedom to execute on plans without constrains over cash.

The only ingredient missing now is overall market sentiment. Wall Street is having a crisis of courage. This week Federal Reserve chair Jerome Powell unofficially announced a rate hike for March. This makes it a fact that the Fed is no longer a friend this year.

Investors will need time to come to terms with losing a tail wind that they’ve had for years. It does not immediately become a head wind, but it has the propensity to do so after a few subsequent hikes. Investors should remain cautious since these circumstances have never existed before. We are in uncharted territory, so we should tread very carefully.

Demand Will Be Persistent

On its own, PayPal is not showing any cracks. Demand for its products and services should remain strong and expand in scope. I can now use my PayPal account to do many more things than just two years ago. Users now can even buy crypto there.

Clearly management is thinking outside the box and pursuing all avenues.

All the damage lies in the PYPL stock as it cannot find footing. By falling below $180 per share, the bulls handed over control once again to the bears. The target from that could extend another $25 lower, although it’s not necessary to do so. The outcome of that battle is likely dependent on the indices.

For now, the bears are in charge on Wall Street and that has not happened in a very long time.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Nicolas Chahine is the managing director of SellSpreads.com.