While governments and financial markets around the world are deeply concerned about the economic and social impact of Omicron, the latest highly communicable strain of COVID-19, executives at Airbnb (NASDAQ:) are waking up to the possibility that new further restrictions could harm business.
The San Francisco-based domestic and global home exchange and residence platform said in a note to analysts released Monday that "the fundamentals of the industry were largely good." Airbnb predicts that the impact of the latest variant will be no worse than the impact on the business of the Delta type.
That seems to us to be a contradictory statement. In mid-August, Airbnb warned that Delta would have an impact on bookings. The warning led to a 4% drop in stocks the following day.
Indeed, the stock has been on a wild ride lately. After ABNB came within a radius of its February record in November, the sale removed about a quarter of the stock's value in one month, from its Nov. 17 high of $212.58 to yesterday's low in March. the day of $160.18.
Let's give the company the benefit of the doubt: In this week's note, they talked about the long-term prospects for their business. Still, for traders, a 25% drop in a stock's value is significant to say the least.
The stock is now teetering on the edge of a knife. If it drops below $160, it will be on track to cut another $30 to test this year's lows again.
Yesterday the price found support at the lows dating back to September. Note the significance of this price level as the 200 DMA amplifies it.
Wednesday's trading formed an imperfect hammer, with a slight upper shadow, that could dissipate some of its bullish energy.
Before the H&S, the price has fallen below the uptrend line since the July 19 bottom. It then found support from the 200 DMA and attempted another rally, but failed when it found resistance near the broken uptrendline.
If the price falls firmly below $160, it will complete a peak-and-trough reversal. A stricter interpretation would require a descending series of highs and lows independent of the uptrend. In our view, the first peak is the last high of the previous trend, as such more conservative traders will feel more confident that a reversal has occurred, with another lower peak and its trough. Trading Strategies
Conservative traders should wait for another pair of highs and lows to increase the likelihood of trend reversal.
Average traders would risk a short after the price closed below $158 and failed to bounce back above $160 for at least two days.
Aggressive traders could go long, counting on support from the lows since September, the 200 DMA and Wednesday's imperfect hammer, before joining the rest of the market with a short, in case the H&S continues .
Trading Example 1 – Aggressive Long Position
Entry: $165
Stop Loss: $164
Risk: $1
Target: $175
Reward: $10
Risk Reward Ratio: 1:10
Trading example – shortly, after completion of H&S
Input: $159
Stop Loss: $161
Risk: $2
Goal: $129
Reward: $30
Risk Reward Ratio: 1:15
