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TripAdvisor, Inc. (TRIP) stock is trading about 5% lower in Wednesday’s pre-market after the online travel company missed fourth quarter profit estimates and reported in-line revenues. Investors chose to ignore an upbeat outlook, focusing squarely on 2018 declines in average hotel shoppers and revenue by hotel shopper. Rival Yelp Inc. (YELP) reports earnings after the closing bell today, ready to shed additional light on the state of the travel and review segment.
Both stocks have come off corrective lows in recent weeks, but TripAdvisor has acted better than Yelp since 2017, trading less than 10 points under November 2018’s two-year high ahead of last night’s confessional. Its rival Yelp remains stuck in a downtrend after breaking 14-month support in the upper $40s in the fourth quarter and looks ripe for aggressive short selling, ahead of a decline into the 2018 low in the upper $20s.
TripAdvisor Weekly Chart (2011 – 2019)
TripAdvisor came public at $27.40 in December 2011 and entered an immediate uptrend that topped out in the upper $40s in July 2012. It finally cleared that resistance level nine month later, entering a momentum-fueled advance that posted an all-time high at $111.24 in June 2014. The subsequent downtrend unfolded in multiple selling waves, continuing into November 2017’s five-year low in the upper $20s.
Dip buyers lifted the stock into the .382 Fibonacci sell-off retracement level in the low $60s in the summer of 2018, ahead of a pullback that found support in the $40s three months later. The subsequent uptick mounted the prior high by more than six points before reversing in a failed breakout that landed on support at the 50- and 200-week exponential moving averages (EMAs) at the start of 2019, ahead of a bounce that has now reached the midpoint of the fourth quarter swoon.
The on-balance volume (OBV) accumulation-distribution indicator topped out with price in 2014 and turned lower in a brutal distribution wave that persisted into November 2017. Buying power since that time has been impressive, lifting OBV back to the prior high, even though price is trading more than 50 points below that level. This bullish divergence bodes well for additional gains in the coming months, despite this morning’s sell-the-news reaction.
Yelp Weekly Chart (2012 – 2019)
Yelp came public at $22 in March 2012, less than three months after its rival, and entered a trading range with support in the mid-teens and resistance in the low $30s. It completed a cup and handle breakout in June 2013, entering a powerful uptrend that posted impressive gains into the March 2014 all-time high at $101.75. Aggressive sellers then took control in a swift decline that cut the stock price in half in just two months.
The subsequent bounce failed at a lower high, completing a double top pattern that broke to the downside in February 2015. The stock got pummeled for the rest of the year, finally bottoming out in February 2016 just 43 cents above 2012’s all-time low at $14.10. A bounce stalled in the $40s ahead of the presidential election, while 2017 and 2018 buying impulses posted nominal new highs (red trendline) into the .382 Fibonacci sell-off retracement level.
A steep fourth quarter decline broke 17-month support in the upper $30s, along with the 50-and 200-week EMAs (blue line), while an oversold rally into February 2019 has now reached this major resistance level. In turn, this raises the odds that aggressive short sellers will reload positions soon and bring the 2018 low in the upper $20s back into play. As a result, poorly received earnings this week could trigger an intensely bearish reaction.
The Bottom Line
TripAdvisor stock is trading lower following a fourth quarter earnings miss, while underperforming Yelp reports results after Wednesday’s closing bell. TripAdvisor’s bearish reaction raises the odds that its rival will lose ground after earnings as well.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.
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