This week’s rug-pull upended the recovery attempt in Airbnb (NASDAQ:ABNB), delaying its long-awaited return to an uptrend. Unfortunately, the timing of the correction couldn’t have come at a worse time for ABNB stock, because it created a failed breakout pattern. In a parallel universe, prices would have powered through resistance, propelling the stock back to a momentum-fueled bullish trend. But, alas, it wasn’t meant to be.
Spectators wondering how to trade the stock now will find some answers below. Rather than bury my take at the bottom, I’ll lead with it. There are far better stocks to buy right now than ABNB. Its technicals are shoddy, and the daily trend has rolled over anew.
If prices do recover from here, it will likely be because the entire marketplace is zipping higher. In which case, there will likely be stronger stocks to play that offer easier rewards.
That said, let’s dig deeper into the stock chart and at least identify which price levels are worth watching and potentially trading around.
ABNB Stock Chart
With only six months under its belt as a public company, there’s little need to use a larger time frame in our analysis. The big picture is clear to see on the daily view as is. While we haven’t had enough time to construct a 200-day moving average, we do have a 50-day and 20-day.
Unfortunately, though, the posture of both is far from inspiring. The 50-day is trending lower and confirms the intermediate-term trend is firmly in the bears’ control.
For its part, the 20-day was climbing, but it too has rolled over alongside price this week and is now flat. That makes the short-term trend neutral, at best. But, of course, moving averages are, by nature, lagging indicators. This week’s overall decline caused ABNB stock to break its prior pivot low. Combined with the failed breakout attempt over $154 that preceded the slide, bulls should be concerned in the short run. Throw it all together, and I think the stock’s posture makes it difficult for directional plays. And that goes for bullish or bearish.
With prices down four sessions in a row until today, and losing 5% in those four days, this isn’t exactly a low-risk entry point for new shorts. Patience, then, is the name of the game for directional players. If I had to play ABNB here, I would focus on some type of high-probability options trade. That way, you get paid while ABNB fiddles.
3 Cash Flow Ideas
There are three ways to position yourself with a cash flow trade. They lean slightly bullish, slightly bearish, or neutral. We’re going to use August monthly options, and there is an earnings announcement between now and then, so you’d need to be comfortable holding into the event if you’re going to take one of these plays.
Bulls could sell the Aug $115/$110 bull put for around 50 cents. Consider it a bet that ABNB stock remains above $115 through expiration.
Bears could sell the Aug $175/$180 bear call for around 50 cents. This bet pays out if prices remain below $175.
If you’d rather not lean directional, you could deploy both spreads to create an iron condor for $1 credit. You will capture the max profit if ABNB sits between $175 and $115 at expiration. Given the recent price movement, I like the profit range width and think it provides a really nice margin of error heading into earnings uncertainty.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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