Technical Support in Place for Airbnb Stock

The stock just conquered multiple levels of resistance

Jul 11, 2023 at 1:42 PM
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Subscribers to Schaeffer's Weekend Trader options recommendation service received this ABNB commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Airbnb Inc (NASDAQ:ABNB) stock recently broke out of a downtrend connecting February and May peaks. The shares are also breaking out of a bull flag pattern after retesting their 10-day moving average yesterday, and conquered former resistance between $129.50-$130, an area that has contained rallies since June. As if that’s not enough technical support, on the weekly chart, ABNB is also breaking out of an inverted head and shoulders pattern.

abnb wt

Peak put open interest (OI) at the 130-strike is growing and could act as support. Meanwhile, short interest is nearing all-time highs, representing 6.4% of the stock’s available float. This leaves plenty of potential for a short-covering rally.
 
An unwinding of pessimism in the options pits could provide tailwinds as well. Of the 42 analysts in coverage, 26 carry a “hold” or worse rating, while the 12-month consensus price target is a slim discount to current levels.
 
Options traders are pricing in low volatility expectations, per ABNB’s Schaeffer’s Volatility Index (SVI) of 37%, which ranks in the low 6th percentile of annual readings. Furthermore, July and August have persistently been seasonally bullish months for Airbnb stock as travel ramps up.
 
Our recommended call option has a leverage ratio of 5.4, and will double on a 19.7% pop in the underlying shares.

 

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