Chart Puts Travelzoo at $11.50
It has not been a pretty two weeks for Travelzoo (NASDAQ: TZOO), as the stock has lost nearly 25 percent over the past seven trading sessions plunging from $23.86 to its current price of $17.95.
A string of downgrades following a company earnings warning last week has sent shares out of their tight consolidation pattern into a relative free fall.
The stock has a history of steep declines, but also has a history of quick recoveries shortly thereafter.
In the short-term, the stock looks to be in oversold territory. Shares showed some resiliency in Friday's session, finishing nearly two percent above the 52-week low of $17.60, which was hit earlier in the day.
The current price may provide longs with a good risk/reward ratio using the 52-week low as a potential stop out point, and a 25-50 percent retracement of the recent plunge as a target price ($19.42-$20.90).
As the 5-year daily chart below (click to enlarge) shows however, the long-term outlook for the stock does not look as promising.
Since putting in a double top last year, the stock has undergone a tremendous wave of selling, moving from over $100 per share to the current price of $17.95. After consolidating between $20-$30 for much of 2012, recent events have caused the stock to break below the key $20 support area. Looking at the chart, we see that the next minor support level comes into play at $14, with major support around $11.60 - 35 percent lower than the current price. Such a move would complete the head and shoulders technical pattern.
Time will tell.
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