Cramer Charts Course for Online Travel
Are travel sites about to take off? For insights Jim Cramer consulted the charts.
"I've been a fan of this group for some time now," said Cramer.
However, the Mad Money host's enthusiasm stems from improved fundamentals. In a recovering economy Cramer thinks people will travel more for both business and vacation. And he likes online travel because he believes the low-price alternatives they provide will steal market away from conventional travel agents. (Read More: Online Travel Stocks: Miles Apart)
Looking at fundamentals, Cramer says "I think Priceline is still the best, followed by Expedia, with Orbitz in a distant third. I think TripAdvisor is in a totally different business, one that's levered to online advertising rates, and I would rather just stick with Priceline."
However, like so many pros, Jim Cramer will often consult the charts to see if patterns either confirm or deny his fundamental thesis.
For the following insights Cramer turned to top technical analyst Bob Lang, senior strategist at ExplosiveOptions.net as well as a Cramer colleague at TheStreet.com.
Here's a synopsis of the Lang's analysis.
Looking at the daily chart of Priceline, Lang points out that Priceline had a giant move higher in January, but since that time, the stock has been consolidating. However, he also notes the stock has held above its uptrend line, so the long-term trajectory remains positive.
In addition, Lang says the so-called Moving Average Convergence/Divergence line or MACD is about to flash a powerful buy signal—typically the signal presents itself right before an advance actually happens.
The analysis suggests the path of least resistance could be higher.
Read More from Mad Money with Jim Cramer
Cramer: Don't Misjudge the Market
Cramer: Oil & Gas Takeout Targets
These Stocks Should Be Bought Aggressively
Lang notes that Expedia has been pulling back from its all-time highs of around $68 which may seem negative, however, it may not be. Lang has also noticed a very solid floor of support at the $60 level, about $2 from where the stock was trading on Tuesday April 9th. If Lang is right and the floor holds, downside in Expedia could be very limited.
Conversely, upside may be in the cards.
In addition, Lang says the Moving Average Convergence Divergence Line or MACD indicator is about to flash that same buy signal as mentioned in the analysis of Priceline. Also Lang believes the stock was oversold but has started to trend higher; that too is sometimes a signal that further gains lie ahead.
All told, if you establish a new position around $60, Lang's analysis suggests there may not be much to lose and a whole lot to gain.
Looking at the charts of Orbitz, Lang notes that share price has tripled since the November lows. And since mid-February, Orbitz has been advancing on high volumes, a sign that could mean the stock was just too cheap.
However, the stock stalled in mid-March and traded sideways, consolidating its gains until last week, when Lang points out that Orbitz once again had a very strong breakout to the upside.
The patterns suggest Orbitz may be starting a second leg of a sizable rally.
In the case of TripAdvisor stock, the daily chart and the weekly chart are sending mixed messages.
Patterns in the daily chart suggest TripAdvisor may have found a floor of support at its 50-day moving average, a short-term measure of the stock's trajectory. Lang says in the past, TripAdvisor has made big moves after touching this key moving average.
However, patterns in the weekly chart suggest the stock may fall further. According to Lang, these patterns suggest TripAdvisor could slide down to the $42 to $45 range. However, if that happens, Lang is a buyer on the belief the stock will rally thereafter.
In other words, technical analysis suggests that either this one holds above the 50-day moving average which is about half a point below where it is now or it pulls back to that $42 to $45 range and then, rallies from there.
What's the bottom line?
Looking at technicals, chart patterns as interpreted by Bob Lang are starting to look very bullish for Priceline, Expedia, Orbitz and TripAdvisor.
Based on fundamentals Cramer's favorite stock in the space remains Priceline.
Call Cramer: 1-800-743-CNBC
Questions for Cramer? firstname.lastname@example.org
Questions, comments, suggestions for the "Mad Money" website? email@example.com