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Travel Stock's "Buy" Signal Has Never Been Wrong

Lillian Currens

Travel stocks have taken a hit, after Morgan Stanley downgraded several airline stocks earlier today, with American Airlines (AAL) getting the brunt of the analyst's drubbing. Booking Holdings Inc (NASDAQ:BKNG) hasn't been immune to the sector dip, down 1.6% at $1,758.17 a share, at last glance. However, the stock just pulled back to a bullish signal that has never been wrong. 

Booking Holdings pulled back to its 160-week moving average, specifically -- a trendline the security has come within one standard deviation of nine times before, according to Schaeffer's Senior Quantitative Analyst Rocky White. The equity was higher every time, averaging a three-month gain of 14.5%. From its current perch, a similar move would shoot BKNG just north of the $2,013 region -- an area the stock hasn't touched since early November. 

BKNG Chart May 20

On the charts, BKNG managed an impressive rally off its two-year lows in late-December before running into resistance around its 200-day moving average and succumbing to a subsequent post-earnings bear gap on Feb. 27. The stock has recovered some of these losses -- briefly recovering this gap in late April -- and has found a recent floor atop the $1,720 area. 

While nine analysts already call BKNG a "buy" or better, there's still 14 tepid "hold" ratings on the books, which could lead to upgrades, should the equity enjoy another long-term bounce.

Options traders have been quite bearish of late, too. Currently, Booking Holdings sports a 10-day put/call volume ratio of 1.29 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 90th percentile of its annual range. This bearish behavior could put even more wind at the equity's back, as these pessimistic positions begin to unwind.