With Earnings Approaching, Expedia Stock Could Be Set for Another Rally

Shares of online travel company Expedia Inc (NASDAQ:EXPE) have been stair-stepping higher during the past year, and now boast a 52-week advance of roughly 23%. More recently, EXPE pulled back to a trendline connecting higher lows since the beginning of the year. Plus, this pullback occurred at the $132 level, which is four times EXPE's 2007 peak, meaning we're buying the dip from this key area. Expedia is also tentatively scheduled to report earnings after the close on Thursday, April 27, and the shares have rallied in the month ahead of these events in three straight quarters.

The shares' impressive technical performance is forcing short sellers to the exits, too. Specifically, more than 15.4 million shares were sold short back in October, compared to just 9.3 million now. This still represents almost 8% of the stock's float, though, which equates to more than a week's worth of buying power, going by average daily volumes. In other words, there's still sideline cash that could come in and drive EXPE higher.

Options traders have remained extremely bearish, however, illustrated by the shares' 10-day put/call volume ratio of 2.21 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- topping 96% of readings from the past year. Also, peak put open interest now sits at the underfoot 125 strike in the April series, and much of this volume is due to sell-to-open activity, suggesting a layer of options-related support is in place.

It's a good time to scoop up EXPE options, too. That is, the stock has a Schaeffer's Volatility Index (SVI) of 16%, which is just 1 percentage point from an annual low.

Subscribers to Schaeffer's Weekend Trader Alert received this commentary on Sunday, April 9.