Expedia Inc. (EXPE) opened sharply lower Friday leaving a downside price void on the chart. Western technical analysts call price voids "gaps" and eastern or Japanese technical analysts call them "windows." Whether you want to call this a gap or a window is not important. What is important is whether this dramatic price change will precipitate further losses or will some investors consider this a so-called buying opportunity.
Let's take a look at the charts and indicators for some guidance or clues.
Looking at this daily bar chart of EXPE, above, we can see that prices made a high in late July and then a lower high this month. Prices have been crisscrossing above and below the 50-day moving average line the past three months. The 50-day line was tested yesterday and will be smashed today. The rising 200-day moving average line intersects just below $140 and it, too, is broken with the sharp gap to the downside. Prices are down near the lows of March and support might develop around here. Prices did not trade in the $120 area for all that long so support may be broken.
The On-Balance-Volume (OBV) line shows a peak in early August and a lower peak this month as a shift from aggressive buying to aggressive selling has evolved over the past four months. The trend-following Moving Average Convergence Divergence (MACD) oscillator made its high in May followed by a lower high in late July and a still lower high this month. The MACD signaled another take profits sell signal a few days ago.
In this weekly bar chart of EXPE, above, we do not have today's price action included, but we know that prices have gaped below the rising 40-week moving average line. There is some chart support around $120 and then the $110 area could come into play. The $125 area is the 50% retracement of the rally from $90 to $160 and that might be a reason some investors return as buyers.
The weekly OBV line peaked in July as did the MACD oscillator -- both indicators are pointed lower.
In this Point and Figure chart of EXPE, above, we can see the big downside price move without showing the gap. The chart shows a possible downside price target of $82 and may be too bearish looking at the volume at price (the horizontal bars on the left side of the chart).
Bottom-Line Strategy: Aggressive traders should wait and see if prices can stabilize in the $115-$125 area. A bounce can occur but it is best to wait for a "retest" of whatever low develops so a sell-stop can be entered below the retest low.