Long Calls – TripAdvisor Inc. (TRIP)

Up-and-comer TRIP could see a reversal ahead

   

The Federal Reserve has released the minutes from its last meeting and the market has continued its recent bullish swagger. But not all stocks have been participating in this rally. Here is a trade idea on a stock that looks like it might finally be able to join the bullish party.

TripAdvisor Inc. (TRIP): Long Calls

TRIPchart 300x121 Long Calls – TripAdvisor Inc. (TRIP)
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The trade:
 Buy the August 60 calls for $3.70 or less.

The strategy: Buying a call option is generally used for a bullish outlook on a stock. For this trade to profit, the stock needs to move higher and the call premium needs to increase to an amount more than was paid. Maximum profit is theoretically unlimited because TRIP can continue to rise and the maximum loss is $3.70 or whatever was paid for the option if TRIP finishes below $60 at August expiration. Breakeven is $63.70 at expiration based on a cost of $3.70.

The rationale: TripAdvisor is an online travel advisory service. The company is a spin-off from Expedia (EXPE) just over a year ago. The company looks to be growing and hopes to challenge Priceline.com (PCLN) someday. That is all well and good but the stock has been declining over the last couple of sessions. In fact it has dropped sp much that t has now fallen to an upward sloping trendline which may act as a support area and move the stock higher again. That is what this trading idea is counting on happening. Even though the stock has fallen, it is technically still in an uptrend over the last month. The stock has set higher pivot highs and lows in the last month and will continue to do so (at least a higher pivot low) if it does currently reverse off of the support area. TRIP needs to take a trip higher!

No positions held at the time of this writing. If you are interested in a free trial of my LIVE options trading room visit: http://markettaker.com/options_insider_trial/

 


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