EXPE Stock Is Setting Up to Advance
Being anything other than bullish on Expedia Inc (NASDAQ:EXPE) stock since the financial crisis subsided in early 2009 has been a fool’s game.
Expedia stock has returned 2254.55% to anyone who had the foresight to buy shares in the midst of this panic. The trend toward higher prices has been relentless, and there are new indications that EXPE stock is once again on the verge of accelerating higher.
My beliefs of higher prices are centered around the style of investment analysis I employ. For nearly two decades, I have been refining my skills in the use of technical analysis. This method is based on the notion that historical price and volume data can be used to discern trends and forecast future prices. As a result, the only tool I need in order to produce an investment view is a price chart.
The following monthly EXPE stock chart illustrates the predominant bullish trend and a supporting technical indicator.
Chart courtesy of StockCharts.com
A bull market consists of a trend in which the price exhibits the quintessential characteristic of higher highs and higher lows. This bullish trend is easily identified on the chart above by using a simple uptrend line. This uptrend line is created by connecting the troughs on the price chart, and it serves to define the bull market in Expedia shares.
This uptrend line is so significant that, as long as EXPE stock continues to trade above the line, I can only assume that higher prices will prevail. If EXPE stock ever did manage to close below this trend line, this event would indicate that the bullish trend had concluded and a correction was set to ensue.
The moving average convergence/divergence (MACD) indicator, located in the lower panel of the above chart, has been instrumental in confirming the intermediate-term trend. MACD is a simple, yet effective, trend-following momentum indicator that uses signal-line crossings to distinguish between bullish and bearish momentum.
In January 2014, a bullish cross was generated, indicating that bullish momentum was propelling Expedia shares, and that the path of least resistance was geared toward higher prices. This indicator effectively confirmed that Expedia stock was set to appreciate.
In January 2015, a bearish cross was generated, indicating that bearish momentum was propelling Expedia shares, and that the headwinds created by this indicator suggested that lower prices were set to prevail. This indicator confirmed that the bullish advance was complete, and EXPE stock has yet to surpass the all-time high that was created in October 2015.
The MACD indicator is currently converging, and a bullish cross can be generated in the months ahead. This indicator would confirm that new highs are on the horizon.
The following Expedia stock chart illustrates the bullish constructive price action that has been developing above the uptrend line.
Chart courtesy of StockCharts.com
The price action above the uptrend line has exhibited bullish constructive tendencies. Bullish constructive price action consists of impulse waves, which are highlighted in green, and consolidation waves, which are highlighted in purple. Impulse waves serve to advance the price, and consolidation waves serve to alleviate overbought conditions and set up the next advancing impulse wave.
I tend to focus a lot of attention on consolidation waves because they are instrumental in suggesting when, and in which direction, the next impulse wave is set to develop.
The consolidation wave that is in development on the chart above comes in the form of a triangle. Triangle patterns contain two converging trend lines, where the lower trend line acts as a level of support, and the upper trend line acts as a level of resistance. These patterns are particularly explosive, and this is a result of momentum being stored within the pattern as it progresses. This momentum is finally released when price exits the pattern.
Consolidation waves are useful on many fronts because, not only do they identify the next direction in the price, but they can also be used to generate a potential price objective. The theory behind this wave structure is that the impulse wave that is in development tends to mirror the impulse wave that preceded it, and the consolidation wave acts as a mid-point. Applying this theory to the price action on the chart above generates a potential price objective of $180.00, which is in line with the notion that prices are set to accelerate.
Bottom Line on Expedia Stock
The long-term trend in Expedia stock is bullish, and there are indications on the EXPE stock chart that this trend is setting up to accelerate. I arrived at these beliefs by analyzing the Expedia price chart and, until there are indications on the price chart that suggest that another view is warranted, I will remain bullish.