EXPE Stock: All Indications Point North
With strong conviction, I can say that I am bullish on Expedia Inc (NASDAQ:EXPE) stock. My enthusiasm for Expedia stock is based on the method of investment analysis I employ to generate a bullish or bearish view on a potential investment. This method is based on technical indicators that are generated on a company’s stock chart. There are currently multiple indications on the EXPE stock chart suggesting that a bullish view is warranted.
This method of analysis is known as technical analysis, and I have been using this method to generate investment views and strategies for close to two decades. This method of analysis is based on price and volume data, and the indications that are produced are therefore timely, which is an extremely important factor when applying this information to an investment strategy.
There are two indications on the price chart below that were instrumental in generating my bullish view.
The first indication is highlighted on the chart below as an uptrend line. This technical tool was created by simply connecting the significant lows that occurred over the years. This uptrend line has supported the advance since August 2014, and it was tested numerous times in 2016. Each and every time this trend line was tested, buyers were eager to step in and support it.
The following EXPE stock chart illustrates the indications that are responsible for generating my bullish view on Expedia stock.
Chart courtesy of StockCharts.com
As a result, this uptrend line has become a dividing line that separates this investment from its current bullish environment and a possible bearish one. So as long as Expedia shares are trading above this trend line, I can only assume that the bull market is still in development, and higher stock prices can therefore be expected.
If for some unforeseen circumstance, the share price falls below this uptrend line, I can only assume that the bullish trend has finally concluded and that lower prices can now be expected to follow. As a result, this uptrend line also serves to define risk in this investment at any given point in time.
The second indicator is located in the lower panel of the same chart, and it is the moving average convergence/divergence indicator, better known by its acronym, MACD. This indicator is produced by subtracting the 26-month exponential moving average from the 12-month exponential moving average, and plotting this result over the nine-month exponential moving average, which acts as a signal line. At this current juncture, this momentum indicator is in bullish alignment after a bullish MACD cross was generated in April 2017.
A bullish cross is used by traders as a buy indication because it serves to suggest that bullish momentum is influencing the trading action in the investment and, therefore, the path of least resistance is geared towards higher prices. This indicator has been especially instrumental in suggesting when the stock price is set to advance.
In 2014, a bullish MACD cross was generated and EXPE stock went on to appreciate to the tune of 56.65% until a bearish MACD cross suggested that the advance had concluded. It took 15 months for a new bullish MACD cross to generate, and I do not take the bullish implications suggested by the indicator lightly.
These bullish indications reinforce the constructive price action that is highlighted on the following Expedia stock chart.
Chart courtesy of StockCharts.com
The EXPE stock chart above is a textbook example of what bullish constructive price action should look like. Bullish constructive price action contains two alternating waves. These two waves feed off each other, and as a result, they create the necessary conditions for the development of a sustainable trend.
The first wave, highlighted in green, is an impulse wave. This wave is characterized by a steep and swift advance. The second wave, highlighted in purple, is a consolidation wave. This wave is characterized by its counter-trend movement that serves to unwind any extreme conditions that were created during the preceding impulse wave. Alleviating an overbought condition creates the necessary conditions where a new impulse wave can develop. This alternating wave structure can continue indefinitely if the fundamentals support it.
The breakout highlighted on the Expedia stock chart is suggesting that the consolidation wave is complete, and a new impulse wave is set to develop.
This wave structure can also be used to generate a potential price objective for the impulse wave that is currently in development. This price objective is produced based on the premise that the consolidation wave acts as a midpoint; this means that the upcoming impulse wave should mirror the one that preceded it. Applying this to the price action on the chart above produces a potential price objective of $180.00.
Bottom Line on Expedia Stock
I am bullish on the prospects of Expedia stock going forward. This bullish view was formed by using a multitude of technical indications that were generated on the EXPE stock. This bullish view is predicated on these indications remaining in bullish alignment.