Chart Of The Day: Airbnb Stock On Knife-Edge As Next Move Remains Unclear
Investing.com | Dec 16, 2021 20:35
While governments and financial markets worldwide have been highly concerned about the economic and social fallout of Omicron, the newest, highly transmissible strain of COVID-19, management executives at Airbnb (NASDAQ:ABNB) aren't losing any sleep over the possibility that new further restrictions could hurt business.
The San Francisco-based platform for domestic and global home swaps and stays declared in a note to analysts released on Monday that "industry fundamentals were largely fine." Airbnb forecasts the impact of the newest variant will not be any worse than the effect to the business of the Delta strain.
To us that seems like a contradictory statement. In mid-August, Airbnb warned that Delta would have an impact on bookings. The warning spurred a 4% drop in shares the next day.
Indeed, recently the stock has had a bit of a wild ride. After ABNB came within a whisker of its February record in November, selling removed about a quarter of the value of the stock in a single month, from the Nov. 17 high of $212.58 to yesterday's intraday $160.18 low.
Let's give the company the benefit of the doubt: in this week's note they were talking about the outlook for their business long-term. Still, for traders, a 25% drop in a stock's value is significant, to say the least.
The stock now teeters on the edge of a knife. If it falls below $160, it will be on a trajectory to drop an additional $30 to retest this year's lows.
Yesterday, the price found support on the lows going back to September. Note the significance of this price level, as the 200 DMA reinforces it.
Wednesday's trading formed an imperfect hammer, with a slight upper shadow, which may dispel some of its bullish energy.
Before the H&S, the price fell below its uptrend line since the July 19 bottom. It then found support by the 200 DMA and attempted another rally, but that fizzled when it found resistance by the broken uptrend line.
If the price falls decisively below $160, it will complete a peak-and-trough reversal. A stricter interpretation would demand to see a descending series of highs and lows, independent of the uptrend. In our view, the first peak is the final high of the previous trend, as such more conservative traders will feel more secure that a reversal took place, with another lower peak and its trough.
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Conservative traders should wait for another pair of peaks and troughs to increase trend reversal odds.
Moderate traders would risk a short after the price closed below $158 and did not reverse back above $160 for at least two days.
Aggressive traders could go long, counting on the support of the lows since September, the 200 DMA, and Wednesday's imperfect hammer, before they join the rest of the market with a short, in case the H&S follows through.
Trade Sample 1 - Aggressive Long Position
- Entry: $165
- Stop-Loss: $164
- Risk: $1
- Target: $175
- Reward: $10
- Risk-Reward Ratio: 1:10
Trade Sample - Short, After H&S Completion
- Entry: $159
- Stop-Loss: $161
- Risk: $2
- Target: $129
- Reward: $30
- Risk-Reward Ratio: 1:15
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