Shorting options on a travel stock facing resistance: A bearish trade strategy

Are you looking for a new investing opportunity? The Extreme Investor Network has your back! Today, we’ll be discussing the recent performance of Expedia Group (EXPE) and a potential options trade to consider.

Despite initially exceeding expectations, Expedia Group saw a sharp drop of over 8% following their earnings conference call due to weak forward guidance. However, in the past month, the stock has managed to recover most of its losses and is now facing a crucial test around the $128 price level.

To help confirm a bearish bias on EXPE, we’re utilizing three key technical indicators:

1. RSI (Relative Strength Index): RSI measures the strength of a trend, and we’ve noticed a loss of upward momentum as RSI has flattened out since June 10.
2. DMI (Directional Movement Index): The DI lines on the chart have started changing direction, indicating a possible trend reversal.
3. ADX (Average Directional Index): ADX has been consistently dropping, suggesting that the recent rally may have lost steam.

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Given these indicators, we are considering a “bear put spread” options trade on EXPE. This strategy involves buying a $124 put and selling a $123 put with a July 5th expiry. The cost of this trade is $50, with the potential to double our money if EXPE is trading at $123 or below on the expiration date.

Keep in mind that $128 is a key resistance level for EXPE, so if the stock continues to climb, there may be opportunities for trades at higher strikes. For example, a $129-$128 bear put spread could be a solid setup if EXPE hits $128 in the coming days.

Stay tuned for more expert insights and trade ideas from the Extreme Investor Network. For personalized advice tailored to your unique circumstances, be sure to consult with a financial or investment advisor before making any decisions. Happy investing!

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