Market Overview

Chart Puts Travelzoo at $11.50

Chart Puts Travelzoo at $11.50
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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.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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