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Is Airbnb Ready to Breakout?

A resistance line has formed in the chart of Airbnb Inc. (ABNB). The stock is also supported by a rising trendline. If the stock breaks through its resistance, a breakout is expected. Read more to learn how to take advantage of this trading opportunity.

Airbnb Inc. (ABNB) is the world's largest online alternative accommodation travel agency, also offering booking services for boutique hotels and experiences. Listings from the company's 4 million hosts are spread over 220 countries and 100,000 cities. Transaction fees for online bookings account for all its revenue.

The company had a solid second quarter where it beat expectations in both earnings and revenues. ABNB benefited from pent-up travel demand as people got vaccinated and many travel restrictions were lifted. The firm has also expanded into other hospitality options such as outdoor and nature activities.

ABNB also has a strong balance sheet. At the end of the second quarter, the company had $7.4 billion in cash on hand compared to no short-term debt. This led to a Quality Grade of B in our POWR Ratings system. Revenue is expected to rise 68.3% for the year, while earnings are forecasted to jump 91.2%.

However, the stock looks very overvalued with a forward P/E of 555.56. ABNB has shown bullish momentum since mid-July. This is evident in the chart below.

Take a look at the 1-year chart of ABNB below with the added notations:

Chart of ABNB provided by TradingView

While running up against a key level of resistance at $176 (red), ABNB has also started the makings of a support trendline (green). The stock just hit that resistance last week and might now be making another run at the trendline. At some point, either $176 or the trendline will break.

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A long trade could be entered on a break above the resistance with a protective stop placed under the point of entry. However, if support were to break the trendline, a short trade could be entered as lower prices could follow.

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ABNB shares were trading at $170.73 per share on Wednesday morning, down $0.01 (-0.01%). Year-to-date, ABNB has gained 16.30%, versus a 21.70% rise in the benchmark S&P 500 index during the same period.

About the Author: Christian Tharp

I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing.


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