Expedia stock reached its all-time high of $161 in late-July 2017, but has been a big disappointment ever since. The stock fell to as low as $98.52 in February 2018, and after a recovery to $118 so far, it is still down by 29.5% from its record high. Now, Expedia Group Inc. is a profitable, free cash flow-producing company, whose debt load is also quite manageable. In general, investors should be looking to buy into such companies, when their shares have declined considerably for some reason. Would buying the dip in Expedia stock be a wise decision right now? In an attempt to answer that question, we have applied the Elliott Wave Principle to EXPE‘s daily chart. The results are not very encouraging.
The daily chart shows the price drop between $161 and $98.52. The first thing, which immediately strikes us as Elliott Wave analysts, is the five-wave structure of Expedia’s selloff. The decline could easily be labeled 1-2-3-4-5 for a complete impulse pattern in wave (1/A). The Wave theory suggests that this pattern shows the direction of the larger sequence. In other words, once the corresponding three-wave corrective recovery in wave (2/B) reaches the resistance area of wave 4, the bears should return to drag Expedia stock to a new low in wave (3/C).
The Relative Strength Index indicator has not reached overbought territory yet, giving us a reason to expect the current recovery to continue towards the $130 area. However, as long as the stock trades below the starting point of wave (1/A) at $161, Expedia investors cannot feel safe.
