Plan Some Summer Profits with Tripadvisor (TRIP)

First day of summer and Tripadvisor (TRIP) is enjoying its day in the sun

   

With today marking the first official day of summer, the travel season is upon us as vacationers take to land, air and seas to get away from it all, even for just a week or two.  While any summer vacation season sees an increase in traffic, this year’s increase in summer travel is combining with already-high business travel to make for a robust market in the travel business.

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Online travel planner Tripadvisor (TRIP) has been capitalizing on the crowded travel market with improving bottom-line earnings results over the last three quarters as earnings have increased more than 21% year-over-year, besting analyst expectations by an average of 7% over the same period.  However, the improvements in the fundamentals have not impressed the analysts covering the shares, as current buy recommendations stand at only 33% of those with an opinion.  A few analysts have upgraded the stock over the last six months. This relative strength leader makes those advisors with a “sell” rating look foolish.

Another group on the wrong side of the TRIP trade has been the short sellers.  Recent data shows that shorts have not backed off their bearish bets against the stock, despite the stock poking through to new all-time highs last month.  With short interest accounting for 15% of the float, the stock remains a short squeeze candidate.

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Finally, the technical picture.  As mentioned, TRIP shares hit a new all-time high just above $65 last month.  The stock has been pulled lower this week as the market careened lower.  Despite the weakness, TRIP remains above its 50-day moving average and is nearing a short-term oversold reading on its RSI.

The technical leadership and resilience of TRIP shares should attract the market as it looks for stocks to grab at a discount during the current pullback.  In addition, the strong continued performance should get the analysts and short sellers jumping on the bandwagon, creating even more buying buzz.  Expect to see support kick in as the stock approaches $60 with an upside target of $65 or better over the short-term, an 8% move.

Stock investors should consider the stock as an attractive addition to their portfolio as TRIP should continue to outpace the market.  Options traders might consider the TRIP September 65 calls as a potential position to benefit from some leverage on the expected move.

Trader X frequents national investment conferences and has developed several market analysis tools that harness the powerful combination of behavioral analysis and technical analysis. He has decades of experience as a registered broker.

But we can’t reveal the source of this trade. Trader X’s privileged insight means he needs to be careful. He must act anonymously. While his identity can’t be known, Trader X will pull back the curtain to the trades he’s discovered.


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