One day doesn’t make a trend. But when it comes to Airbnb (NASDAQ:ABNB) shares, the big picture suggests it could be time to book a short-term stay in your portfolio. Let’s see what’s happening off and on the Airbnb stock chart, then offer a risk-adjusted buy determination aligned with those findings.
For many on Wall Street, Wednesday was a cause for celebration. Inauguration Day saw the large-cap S&P 500 rally 1.25% to record highs. And the tech-heavy Nasdaq Composite rushed past a bearish barrier hastily constructed the past several sessions to new all-time-highs on gains of nearly 2%.
But the new tenant at 1600 Pennsylvania Avenue failed to impress private-stay giant ABNB and its investors. Airbnb stock tumbled by nearly 7%.
So, what gives?
A Theory on the Price Drop
It’s hard to know for certain. As with any growth story, even the best stock can be a two-way street on any given day. And that could be the case for ABNB. In this particular instance, some bearish operators or bulls residing in shares may have taken their cue to plot against Airbnb stock or exit the premises after listening to Fox News.
Not exactly a friend of the new administration, the news network was first to the scene with a breaking report that Airbnb may be using dummy accounts on Facebook (NASDAQ:FB), Twitter (NYSE:TWTR) and other social media platforms to identify hate-group insiders and make customer determinations, i.e., “sorry, you’re not welcome to stay at any price.”
In following up with a company spokesperson, Fox was told that Airbnb requires users to abide by its Community Standards agreement. The company went on to say it has long taken a stance against members associated with “terrorist, organized criminal and violent racist groups.” Furthermore (drumroll please), since the riot at the Capitol in early January the company has banned individuals confirmed as participants in the violent criminal act. A-ha!
A-ha? In conjunction with law enforcement and other media sources, Airbnb did avoid confirming or denying whether it used dummy social media accounts to identify the blacklisted accounts. And you thought ABNB stock was only about Covid-related tenuous “scarcity values”, lockdown bookings or valuation concerns?
Airbnb Stock Daily Price Chart
Source: Charts by TradingView
On any given day, “it is what it is,” I suppose. And when it comes to price charts and investor reaction, some days will be uglier than others. Right now though, it’s important for Airbnb stock to not lose sight of a more bullish big picture.
The result of Wednesday’s decline and some follow-through on Thursday is a fairly straightforward pullback pattern now four days in duration. With the price action also setting up as a challenge of key uptrend, key Fibonacci support from roughly $147 to $155 and stochastics flattening inside neutral territory, booking a short-term stay in shares makes sense.
The Bottom Line
If investors are looking for the next Tesla (NASDAQ:TSLA) or Apple (NASDAQ:AAPL), there may be better entries down the road when shares put together a larger but quite common correction of around 30%. This past week’s corrective activity stands at 17%. But as expressed, there’s enough working in ABNB’s favor to consider a purchase.
Bottom line, I’d suggest waiting for a daily chart candlestick that confirms a pivot low within the simple pullback pattern. That could happen as soon as Friday.
Of course, there’s no guarantee a signaled bottom will hold today’s angrier mob at bay. With that in mind, and to afford a more pleasant short-term stay regardless of the outcome, the February $175/$200 Bull Call Spread is one well-aligned, efficient and cost-effective alternative to a more traditional stay in Airbnb stock.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.