Bearish traders in Expedia (NASDAQ:EXPE), Hotels.com (NASDAQ:ROOM) $38.20 -5.5% and Ticketmaster (NASDAQ:TMCS) $16.53 -8.92% have eaten their dinner and are quite satisfied after their suitor for potential merger USA International (NASDAQ:USAI) $20.96 -7.90 drags each of the previously mentioned stocks lower on concerns that USA International (USAI) uses EBITDA accounting that may be suspect to what WorldCom (NASDAQ:WCOM) shareholders are experiencing. While there is no reason to believe that USAI or any other company reporting EBITDA earnings would fraudulently mislead investors, it does appear to be weighing on the media group and USAI.
As noted in my June 19th, 03:00 Update at OptionInvestor.com, a past bearish profile of Expedia (NASDAQ:EXPE), one of the companies that USAI has made a stock offering to buy, is being pulled lower as the previously announced merger intentions were for a stock-for-stock transaction.
The "dinner" portion of a bear's meal has been served and EXPE reached a bearish trader's target as did the "tie in" with USAI at the $22 level. As such, I'm recommending that bears in EXPE, ROOM or TMCS continue to monitor shares of USAI and if USAI were to trade above the $22 level, go ahead and lock in gains.
However, there may still be the opportunity for desert. As mentioned in the June 19th 03:00 Update, the exchange offering between USAI and EXPE/ROOM/TMCS has yet to be approved by shareholders, and with USAI's stock price declining rather quickly, the "deal" may now be experiencing further trouble. While I know of nothing that is indeed going to cause the recently proposed merger into USAI to be cancelled or delayed further, any cancellation of the merger could be a bear's desert in past bearish profile of Epedia (EXPE).
USA Intl. Chart - Daily Interval
USAI has broken below the $22 level, and that was correlated against the bullish support trend from USAI's point/and figure chart. That served as a "bearish target" for bears in EXPE to correlate against. Since that level was severely violated to the downside today, I'd suggest lowering a stop in EXPE that would correlate against a USAI trade above $22. Bears in EXPE that are happy (as well they should be) with current gains, can move on from here. Should USAI break below the $19.68 level and no news comes of a failed merger between USAI and EXPE, then I'd expect EXPE to decline along with USAI.
Expedia Chart - Daily Interval
Yesterday, EXPE achieved its bearish vertical count from the point and figure chart, but the bearish price action in USAI continues to pull EXPE lower. Good correlation can be found at the various levels of retracement between EXPE and USAI, giving the trader some good observations from which to may risk/reward assessment from.
All of this can be used in the future when acquisitions for stock are announced. It should be noted that the above is a stock-for- stock deal with a pre-defined ratio, which USA Intl. (USAI) later said would not be "sweetened" despite the decline in its own share price.