Take a deep dive with us into the how and why of an expected continued uptrend in the Travel Sector.
We look at the company specifics for Booking.com and show why we like it for a buy-and-hold over the next several months.
The near term should provide a buying opportunity. We share price targets for this anticipated pullback.
by Levi at Elliott Wave Trader; Produced with Avi Gilburt
While the macros of the market will affect most stocks most of the time, there are also certain sectors that will outperform. And, as Captain Obvious informs us, other sectors will underperform the overall market. Every week we share sector outlooks with our members in a live, interactive video session. Recently, Zac Mannes and Garrett Patten presented their views on the Travel Sector with some favorite picks highlighted.
-->( Please note : due to a technical snafu, our prior article in this series published 2 days ago was not viewed by the readership. ["Travel, Take Me Away! Part 1 - Delta Airlines"]. We would highly recommend you peruse the principal points since they outline the fundamental macro thesis for our current stance.)
Herein we present Part 2 of our Travel Sector coverage - ( BKNG )
BKNG Fundamentals With Lyn Alden
"I am rather bullish on BKNG for the long term, although whenever a stock goes vertical like this, I like to see a correction to let some of the steam off.
After a three-year correction due to the pandemic, BKNG's fundamentals and stock price are back on the prior bullish trend. Their revenue is going up, their bottom line is doing well, and the stock price is reflecting that.
FastGraphs
The company also has a strong balance sheet, with no net debt. So a reasonably high equity valuation is warranted.
YCharts
Both revenue and bottom-line profitability are back on their pre-pandemic trend.
YCharts
Overall, I view BKNG as a good buy-and-hold for the travel industry. However, the stock has screamed higher all throughout 2023, so new buyers should exercise caution and expect periods of correction even if it continues its bullish trend over the long run."
A Pullback Is Anticipated In The Near Term
Great! This will give us a chance to get positioned for the next rally phase. As Lyn points out so well in the paragraph above, price may have become a bit stretched. As well, we now have 5 waves up from the Primary Wave 2 low at $1616 struck back in October of last year. What does this mean for us?
by Zac Mannes - StockWaves / MotiveWave
by Garrett Patten - StockWaves / MotiveWave
We're sharing both of our analyst charts here to show the agreement and how the structure of price is being interpreted in the same manner by both. This gives us greater confidence in the setup.
Over the course of years observing the markets and the individual stocks in it, Zac and Garrett have come to see that when the [A] wave of a larger Wave 3 is composed of 5 waves, as is the case with BKNG now, then the [B] wave pullback can be a bit more shallow than typical. So, what are we watching for here?
Assuming that the $3250 area is the top of [A], we can project a pullback target zone of anywhere from 38% to 62% of the range of the $3250 high to the $1616 low. Remember, that zone is the standard, but when the [A] wave is 5 waves, it can be shallow. This is where we will closely observe the structure of the smaller waves down from $3250. The [B] wave should deconstruct down into a smaller A-B-C. Once those subwaves are shown to be completing, we will then anticipate the [B] wave to be nearing its end and will be preparing for the larger [C] wave of the Primary Wave 3.
This Wave 3 should target $4875 or higher, over time, of course. Now, how do we apparently 'divine' this target? It has nothing to do with guessing and everything to do with mathematics. This is not to be confused with just simply arithmetic. But, you also don't need be imagining something complex and complicated. In fact, all you need to do is be able to count to five.
Enter Fibonacci Pinball
Avi Gilburt has been known to say, "The nice thing about my job is that I do not have to count higher than 5. And, I know that 3 often follows 2." Now, obviously this is said a bit tongue-in-cheek, but it highlights the point that rallies in stocks and the market typically take place in 5 wave advances and 3 wave declines.
Let's take a quick lesson in Fibonacci Pinball from Avi:
"Once wave 2 completes its pullback, the market embarks on what we call the heart of the 3rd wave, which is usually the most powerful part of the rally structure, wherein we see a strong and fast rally to the 1.236 extension of waves i and ii, as we complete wave 3 of iii. So, the ideal entry point would be as wave 2 nears completion, with your natural stop being the bottom of wave 1. (Remember that an impulsive structure will be invalidated if wave 2 retraces more than 100% of wave 1).
After striking the 1.236 extension in wave 3 of iii, we usually see a corrective pullback towards the .764 extension for wave 4 of iii, which then sets up the next segment of the rally to the 1.618 extension for wave 5 of iii. We then see a pullback from the 1.618 extension back towards the 1.00 extension for wave iv, which then sets up wave v towards the 2.00 extension of waves i and ii.
As far as trading guidelines, once we strike the 1.236 extension you can move your stops up from the bottom of wave 1 of iii to just under the .764 extension, and you may then choose to exit your position once the market strikes its completed 5 wave structure for wave 5 of iii. Since 4th waves are often 'premium killers', most traders will take their profits at this point, and look for a re-entry once wave 4 nears its completion. Many traders do not even trade the 5th wave, as catching a 3rd wave is what most traders are really focused upon.
This is how Fibonacci Pinball works in its simplest form. Of course, there are often small adjustments we make along the way in real time based upon how the market develops within the sub-waves, but this is the general structure."
How We Apply Pinball To BKNG
Using this standardized method of trading/investing, we can now project a near term pullback in price, as outlined above. Should this pullback be deeper than anticipated, we will be watching the $2275 area for a potential invalidation of our bullish outlook. But, we anticipate the pullback to be more shallow than that, perhaps to the $2400 - $2600 zone. Again, please remember that the smaller subwaves will help us determine this target as we get closer to completion of the anticipated pullback.
There are many ways to analyze and track stocks and the market they form. Some are more consistent than others. For us, this method has proved the most reliable and keeps us on the right side of the trade much more often than not. Nothing is perfect in this world, but for those looking to open their eyes to a new universe of trading and investing, why not consider studying this further? It may just be one of the most illuminating projects you undertake.
(Housekeeping Matters)
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