PCLN and EXPE shares tend to bounce off their 80-day moving averages
Travel stocks Priceline Group Inc (NASDAQ:PCLN) and Expedia Inc (NASDAQ:EXPE) have been pulling back from record highs, due to sector headwinds. However, the stocks' dip could be a buying opportunity, if recent history is any indicator. Below, we will break down PCLN and EXPE's historical movement following similar pullbacks, and analyze the skepticism surrounding the shares.
Priceline Stock Sinks on Earnings Beatdown
Priceline stock is down 2% to trade at $1,870.45, still feeling the fallout from its subpar
earnings guidance yesterday. Prior to this bear gap, Priceline stock touched a new record high of $2,067.99 on Tuesday.
PCLN stock is now within one standard deviation of its 80-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, this has been a bullish signal more often than not. After the last eight pullbacks to this trendline, PCLN was higher one week later 75% of the time, and averaged a gain of 2.3%. Extending this data out to a month after a pullbck, Priceline stock was higher 63% of the time, and averaged a return of 3.48%. This indicates that traders may want to buy the dip on the travel stock.
Bearish traders have been dominating the landscape in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMC PHLX (PHLX), PCLN's 10-day put/call volume ratio of 1.22 ranks in the 93rd percentile of its annual range. A rebound from PCLN off its 80-day moving average could spook these bears and push the travel stock even higher.
In light of the security's post-earnings
volatility crush, it is an opportune time to purchase near-term options. PCLN's Schaeffer's Volatility Index (SVI) of 17% stands higher than just 17% of all other readings from the past year.
Expedia Stock Looking For a Bounce Back To July Levels
Expedia reported upbeat earnings on July 27, and subsequently jumped to a
new record high of $161.00. Since then, however, the stock has reversed course amid underlying
travel sector struggles. EXPE stock is currently down 2% to trade at $144.82, a 10% drop in just over two weeks. However, the stock has still turned in a solid year thus far, tacking on 28% year-to-date.
Just like its fellow travel stock Priceline, Expedia stock has found itself one standard deviation from its 80-day moving average. After the last 13 pullbacks to this trendline, EXPE was higher one week later 62% of the time, and averaged a gain of 1.75%. Extending the data out a month shows EXPE again higher 62% of the time, yet with a 2.45% average return. Much like rival Priceline, it appears Expedia could be in for a short-term rebound, if history repeats.
In addition, it appears there is plenty of room for a short squeeze to further fuel an EXPE bounce, should the shares once again recover. Short interest increased by 10% during the last two reporting periods, and accounts for nearly 10% of the stock's total available float. At EXPE's average daily trading volume, it would take more than eight sessions to repurchase all of these pessimistic positions.
The options pits reveal more bearish tendencies. ISE/CBOE/PHLX data shows EXPE with a 50-day put/call volume ratio of 1.24, which is 4 percentage points from a 52-week high. If past is precedent, EXPE's rebound could spook these options bears, sending the stock back toward record highs.