The Trendline That Could Have Expedia Inc (EXPE) Set to Take Off

Expedia Inc (EXPE) has pulled back to multiple layers of support after marking a series of higher highs

Dec 15, 2016 at 12:11 PM
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Travel interest Expedia Inc (NASDAQ:EXPE) has had a bumpy road over the past 12 months, shedding one-third of its value between mid-December and early February, but then hitting a series of higher highs and lows in the ensuing months. The shares topped out at an annual peak of $133.55 in late October, and have since pulled back to multiple layers of support. If EXPE can manage a bounce from here, there may be enough fuel left in the tank for another run higher.

Specifically, the stock has pulled back to its 160-day moving average -- a signal that has occurred five previous times in the last three years, according to Schaeffer's Senior Quantitative Analyst Rocky White. Looking back at these five signals, EXPE stock has averaged a five-day post-signal return of 0.5%, and has been positive 80% of the time. At 21 days out, the shares have also been positive four out of five times. However, the average return for the period comes in at negative 0.1%. Put simply, a pullback to this trendline tends to precede a move higher, but if not, it could indicate a particularly large drop-off ahead.

Luckily, EXPE has so far managed to stay above the trendline in question, up 0.9% today at $117.45. And there's more support on the stock's side, as well. The 320-day moving average has taken on a helpful role for the shares, as has the $116-177 region, which supported EXPE in late-September and early October, afters serving as resistance earlier in the year. 

EXPE Daily Chart December 15 2

Assuming the stock can stay above water, it looks like there's room to run. After all, the 14-day Relative Strength Index (RSI) of 34 is edging on oversold territory. Plus, short interest represents 11.4% of EXPE's total float, even after these bearish bets dropped by nearly 13% during the last two reporting periods. At the equity's typical pace of trading, it would take nearly two weeks for short sellers to cover their positions.

Meanwhile, options traders have been picking up EXPE puts at an unusual rate in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock holds a 50-day put/call volume ratio of 1.09 -- in the bearishly skewed 79th percentile of its annual range. Puts are hot today, too, trading hands at twice the expected intraday rate. So far it looks like some speculators may be buying to open the December 117 put, betting on EXPE to slip back below the strike by tomorrow's close, when the front-month series expires.

Not everyone is a pessimist, however. Expedia Inc (NASDAQ:EXPE) has seen a fair bit of bullish attention from the brokerage bunch, with 84% of covering analysts rating the security a "buy" or better, and not a single "sell" opinion on the books. Plus, the average 12-month price target sits well overhead, at $142.46 -- in never-before seen territory.

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