Expedia Stock Has Just Broken Out

EXPE stockEXPE Stock: In Bullish Alignment

I have been waiting for indications on the Expedia Inc (NASDAQ:EXPE) stock chart which would suggest that higher Expedia stock prices are on the horizon.

I am extremely excited to report my findings on Expedia, because numerous indications have come together at the same time to reinforce the implications that these bullish indications are now suggesting. As a result, it is my belief that EXPE stock is on the verge of an accelerated run to the upside.

If you haven’t come across any of my publications in the past, let me quickly explain how my investment views are generated. I employ the method of investment analysis known as technical analysis to create my views on a potential investment. This method of analysis is based on the notion that historical prices and volume data can be used to discern a trend and forecast future prices.

The following price chart illustrates the development that supports the view of higher Expedia stock prices.

Expedia stock prices

Chart courtesy of StockCharts.com

The focus on the price chart above is the breakout that is highlighted in pink. This breakout signifies that there have been bullish developments within the constructive price action that is now suggesting that higher prices are likely.

Constructive price action contains an alternating two-wave structure that consists of an impulse wave and a consolidation wave.

The function of an impulse wave is the progression of price, it can be in the form an advance or a decline. The function of a consolidation wave is to alleviate any overbought conditions that were created during the progression, and more importantly, set up the next impulse wave. This alternating wave structure creates the necessary building blocks that define and create a trend.

I tend to focus a lot of my attention on the consolidation wave because this pattern is a midpoint; it is where the trend can pause prior to its next progression in price. The breakout indicates that a new impulse wave is now in development. Because price exited the pattern in upward direction, this development supports a bullish advance.

Consolidation waves are useful on many fronts because they not only identify the direction of the next wave in development, but they can also be used to generate a potential price objective. The theory behind these waves states that impulse waves impulse tend to mirror each other in terms of length, because the consolidation wave acts as a mid-point. Applying this theory to the price action on the chart above generates a potential price objective for the developing impulse wave of $180.00.

There are two indications on the following Expedia stock chart that support the bullish view of further price progression.

EXPE stock chart

Chart courtesy of StockCharts.com

The uptrend line and the moving average convergence/divergence (MACD) indicators are the focal points on the chart above. Both indicators suggest that bullish tailwinds are influencing the stock, and that the stock is geared towards higher prices.

The first indicator, the uptrend line, is used to define the bullish trend, as well as price support. This uptrend line is created by connecting the troughs on the price chart. Using this trend line as a tool is as simple as it was to create. Trading above the trend line is a bullish indication, while trading below it is a bearish one. As long as EXPE stock continues to trade above this trend line, I can only assume that higher prices will prevail. If the share price ever closes below this trend line, I can only assume that the bullish trend has concluded, and a larger correction is set to ensue.

The second indicator is the MACD indicator, located in the lower panel of the above chart. MACD is a simple, yet effective, trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum. This indicator has an impressive record of correctly indicating which wave is in development.

In January 2014, a bullish cross was generated, indicating that bullish momentum was fueling the rise in Expedia shares. A bullish cross serves to suggest that the path of least resistance is geared towards higher prices, and this indicator failed to disappoint because EXPE stock proceeded to advance until a bearish cross negated the advance.

This bearish cross was generated In January 2015, indicating that bearish momentum was preventing Expedia shares from appreciating. The bearish headwinds created by this indicator suggested that the path of least resistance was geared toward lower prices. During this bearish MACD cross, the price spent much of its time testing support outlined by the uptrend line.

The bullish MACD cross that was just generated in April implies that bullish momentum is fueling an advance. This event is occurring at the same time that the price is breaking out of the consolidation wave. This confluence of bullish indications reinforces the notion that higher prices are now likely to follow.

Bottom Line on Expedia Stock

Numerous indications on the Expedia stock chart are suggesting that EXPE stock is now set to appreciate. My bullish view on Expedia was produced by using indications that were generated on the company’s price chart. Therefore, I will remain bullish on this investment until there are indications which suggest that holding another view is warranted.