TRIP Possible Reversal
Did you ever use TripAdvisor? It’s been around for a while an seems to work well.
In case you are not familiar with it: it’s a website where you can book hotels and holiday trips while comparing prices.
How about its stock price?
Their stock price has come a long way… that is, DOWN. From its former heights of $111, it reached a recent low of $29.59.
That’s hardly a great performance. If you would have bought it at its peak and kept it until today, you would have lost 61% of your investment!
So what has changed?
The fundamentals have not changed. While they make money, it’s not as if they suddenly make more. But the charts show some indicators that the stock price might reverse, i.e. the bottom of the downtrend might have been reached.
There are 4 indicators that show a potential reversal:
- The downtrend has been broken, i.e. the price surged above the trendline
- Prices reached new highs, resulting in a 9-months breakout (highest price within 9 months)
- The floor price levels moved higher instead of lower
- The ceiling price levels moved higher instead of lower
All these are signs of a change in market climate for TripAdvisor.
How does it compare to similar companies?
When looking at 12-months performance, TRIP did not so well. In fact, it shows the worst performance compared to the other companies.
But when looking at the last 3 months only, a different picture emerges.
Now, TRIP outperforms all others… even Amazon (AMZN). And that is despite the recent stock market correction, which is quite impressive.
What will happen?
Trends tend to continue… until they end. And that could be the end of the long-term downtrend for TRIP.
However, that does not mean that the stock will immediately show a strong uptrend. It could as well stay within a sideways trend and bounce up and down within a trading range for a while.
There are 3 scenarios:
- It’s a fake reversal and the downtrend will continue
- It’s a sharp reversal and the stock price will surge up
- The price will stay within a sideways trading range for a while before a new trend emerges
My personal guess is on (3)… but there is no way to know for sure.
How to invest in TRIP?
Here’s what you could do:
- Do nothing, keep observing until a trend emerges
- Buy but put a wide stop (30% or more)
- Assume that the price will go down again and buy at a lower price (and a smaller stop, like 15%)
Myself, I will wait and see if the price comes back down to lower levels (like $38.50). If it does not happen then I might miss the trade… but there are always others.