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This morning I am recommending a bearish trade on Expedia Group, Inc. (NASDAQ:EXPE), the online travel company.

We’ve seen strong earnings from United Continental Holdings, Inc. (NASDAQ:UAL), which owns and operates United Airlines, and Delta Airlines, Inc. (NYSE:DAL). In theory, strong earnings from airlines should translate to strong earnings from travel stocks like EXPE, but EXPE’s technical picture doesn’t look good.

Global Exposure

The U.S. economy is doing quite well, but we are in the middle of a geopolitical recession. For example, Venezuela is experiencing  political upheaval after years of economic mismanagement. There’s also the ongoing trade dispute between the U.S. and China, which doesn’t seem any closer to ending.

Furthermore, there is a “debt bomb” looming above markets and economies all over the world. Debt-to-GDP ratios are off the charts across the globe, and eventually that is going to bite and act as a depressant for the market.

EXPE is a company with a lot of international exposure, and a slowing global economy will hurt the stock. And those earnings from the airlines might not help EXPE as much as you think. One of the positive signs from UAL’s recent earnings was 12% growth in domestic business, which only indicates increasing demand in the U.S.

A Steady Downtrend

If we turn to a daily chart of EXPE, we see that the stock has been in a downward channel since August of 2018. Though the stock is rallying right now, it has to overcome a lot of overhead resistance.

Daily Chart of Expedia Group, Inc. (EXPE) — Chart Source: TradingView

EXPE rose above resistance at $123.50 yesterday. But ultimately it was rejected, and it closed the day at the $123.50 level. It could drop today after a failing to close above resistance, but even if it doesn’t, it still needs to overcome resistance at the $128 level.

I don’t think the fundamental outlook for EXPE is strong enough to justify its recent rally, even with travel in the U.S. up, and because the technical picture for EXPE looks weak, I’m recommending a downside play.

Using a spread order, buy to open the EXPE March 8th $115 put and sell to open the EXPE March 8th $112 put for a net debit of about $0.60.

Note: There are several March expirations available for EXPE options. Be sure you are opening the weekly options that expire on Friday, March 8, 2019.

A debit spread is simply a way to lower the cost of buying options, as the option that you sell to open (short) helps offset the cost of the option that you buy to open. Therefore, this put debit spread is a way to lower the cost of buying bearish put options. Many brokers will require the use of margin and/or a set amount of reserved capital to execute a debit spread; contact your broker directly for specific requirements.

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Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.