Wall Street is in lockdown mode. But in a market made up of stocks, investors have been busy booking stays in shares of Airbnb (NASDAQ:ABNB). Looking forward though, is now a good time for investors to entertain a purchase of ABNB stock for their own portfolios?
Let’s look at what’s happening off and on the price chart of the alt-travel stock, then offer a risk-adjusted determination that should keep long-term tenants in ABNB stock happier campers.
Does a seasonal bull flu or worse, Covid-19 and its delta variant have you down? For investors making their home in the large-cap, broad-based S&P 500, those factors appear to be helping with some modest fatigue of about 1.50% on the month.
Yet that’s hardly the case in ABNB stock. Shares are up a healthy 8% as we move into the back half of September.
ABNB Stock Draws Interest
So why the sudden interest in ABNB? Well, it’s not as though ABNB has been enjoying travels with the broader market. And to be fair, that could be incentive enough.
The reality is September’s small change to the bellwether’s travel itinerary follows a dazzling 11 straight months of new highs and gains approaching 20% on the year.
Remember that broad-based rotation into value and cyclical stocks this year? Maybe it’s time to revisit those reasons as they hold less water today given the ferocious buying spree.
At the same time, since peaking in February at $219.94 ABNB stock remains 25% beneath it’s high. What’s more and at its weakest in May, shares of Airbnb corrected as much as 40%.
So while bearish seasonality and the pandemic continuing to be an unwanted visitor are decent enough reasons to be trim a bit of fat from today’s higher-multiple “value” portfolios, it’s a bit less relevant to today’s ABNB stock.
Moreover, coupled with solid earnings this past month, the idea there’s always a bull market somewhere and words popularized by CNBC’s James Cramer, should and is likely resonating more strongly with ABNB investors right now.
ABNB Stock Monthly Price Chart
Source: Charts by TradingView
I’m agreeable there’s always a bull market somewhere. And today, despite this month’s gains or the rally off its May low, ABNB stock is offering a nearby spot to get in on that type of action.
As the illustrated monthly chart of Airbnb reveals, shares are approaching a breakout of May’s bottoming candle. If shares are able to clear the technical hurdle, ABNB stock would also be moving past the 50% retracement level of its bear market cycle.
Essentially, bullish investors are getting two technical victories for the price of one, which together bode well for better days ahead for Airbnb shares.
A rally through the Fibonacci level puts ABNB into the right side of a lifetime corrective cup-shaped base. And if history is to repeat or at least rhyme, the bullish pattern could lead to a very powerful breakout to new all-time-highs.
Conservatively, a measured move out of the cup base could eventually find shares fetching north of $300 over the next year to eighteen months based on the size of formation.
What to Do
As much, buying into an emerging bull market phase in ABNB stock offers an attractive risk-to-reward profile based on the proposed buy signal through May’s high and the 50% Fibonacci level.
Bottom line though, and for any bullish venture in stocks, having travel insurance on a long ABNB position such as a married put spread or actively-managed collar is always a welcome policy in this strategist’s view.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
