TripAdvisor Trading Sharply Lower After Earnings Miss

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TripAdvisor Trading Sharply Lower After Earnings Miss

TripAdvisor, Inc. (TRIP) stock is down roughly 5% in pre-market trade on Wednesday after the online travel business failed fourth-quarter profit projections while reporting in-line sales. Investors decided to dismiss the positive prognosis, instead concentrating on 2018 decreases in average hotel shoppers and revenue per hotel shopper. Yelp Inc. (YELP) will announce results after the closing bell today, providing further insight into the status of the travel and review business.

Both stocks have recovered from recent lows, but TripAdvisor has performed better than Yelp since 2017, trading less than 10 points behind November’s two-year high ahead of last night’s admission. Its competitor Yelp is still in a downtrend after shattering 14-month support in the high $40s in the fourth quarter, and it seems ready for heavy short selling ahead of a drop towards the 2018 bottom in the mid $20s.

TripAdvisor Weekly Chart (2011 – 2019)

TripAdvisor went public in December 2011 for $27.40 and immediately began a rise that peaked in the mid $40s in July 2012. It eventually broke above that resistance level nine months later, launching a momentum-fueled rally that culminated in an all-time high of $111.24 in June 2014. The ensuing downturn unfurled in successive selling waves, culminating in a five-year low in the mid $20s in November 2017.

In the summer of 2018, dip buyers propelled the stock over the.382 Fibonacci sell-off retracement level in the low $60s, ahead of a pullback that found support in the $40s three months later. The ensuing upswing surpassed the previous high by more than six points before reverting in a failed breakout that fell on support around the 50- and 200-week exponential moving averages (EMAs) at the beginning of 2019, ahead of a rebound that has now reached the midway of the fourth quarter drop.

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The accumulation-distribution indicator on-balance volume (OBV) peaked with price in 2014 and fell downward in a harsh distribution wave that lasted until November 2017. Since then, buying power has been tremendous, bringing OBV back to its previous high, despite the fact that the price is trading more than 50 points below that level. Despite this morning’s sell-the-news response, this bullish divergence speaks well for greater gains in the coming months.

Yelp Weekly Chart (2012 – 2019)

Yelp went public in March 2012, less than three months after its competitor, for $22 per share, and began a trading range with support in the mid-teens and resistance in the low $30s. It achieved a cup and handle breakout in June 2013, launching a robust uptrend that saw it reach an all-time high of $101.75 in March 2014. Aggressive sellers quickly gained over, causing the stock price to fall in half in only two months.

The ensuing rally failed at a lower high, completing a double top pattern that began in February 2015 and broke to the negative. The stock plummeted for the remainder of the year, eventually bottoming out in February 2016 at $14.10, only 43 cents above the all-time low set in 2012. A rally in the $40s paused before of the presidential election, although purchasing impulses in 2017 and 2018 produced nominal new highs (red trendline) towards the.382 Fibonacci sell-off retracement level.

A sharp loss in the fourth quarter shattered 17-month support in the high $30s, as well as the 50- and 200-week EMAs (blue line), while an oversold recovery into February 2019 has already hit this important resistance level. As a result, the chances are that aggressive short sellers may refill positions shortly, bringing the 2018 low in the mid $20s back into play. As a consequence, disappointing results this week might spark a severe adverse response.

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The Bottom Line

TripAdvisor stock is down after a fourth-quarter earnings shortfall, while lagging Yelp publishes results after the market closes on Wednesday. TripAdvisor’s pessimistic response increases the likelihood that its competitor will lose ground after results as well.

Disclosure: At the time of publishing, the author had no investments in the aforementioned securities.

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