$TREE looks to be setting up for a move higher in 2017, one that could possible see it trade up to its previous record high price $139.
The stock is rubbing up against long term trendline resistance, but has been putting in a series of higher lows. When the resistance gets broken the move to the upside will likely be a sharp one.
Timing the move will be the challenge. As it stands now, the action is taking place right at that trendline resistance.
In anticipation of possible break higher this week I entered the $105 Jan calls that expire this week. I plan on going out to February calls at some point this week as well.
The stock also has a strong short interest, meaning a sharp break higher in price will likely be augmented by short covering.
.... more on $TREE
As shares of online lending marketplace stock Lendingtree Inc (NASDAQ: TREE) have climbed 220 percent in the past three years, the number of traders betting against the stock has exploded 2,300 percent. Ironically. all of these short sellers may be the cause of the stock’s recent resiliency and the reason why positive news could send Lendingtree soaring to new highs.
Short sellers have taken quite a beating on Lendingtree, but they have remained stubborn. Short interest is up 52.5 percent in the past year and now stands at an extremely high 42.9 percent of float. According to shortsqueeze.com, there are currently more than 3.0 million shares of Lendingtree held short with 11.8 days to cover.
With such an incredibly high short interest, there are two factors in play with Lendingtree’s stock.
First, every significant dip in share price will likely be met with buying pressure from shorts covering their positions, similar to the situation with high-flying tech stock NVIDIA Corporation (NASDAQ: NVDA). Second, if Lendingtree can carry its 2016 momentum into 2017 and reach new highs, at some point shorts may abandon the trade en masse. The combo of momentum traders buying and short covering could produce a major short squeeze.
The next big short squeeze opportunity for Lendingtree traders will likely come when the company reports Q4 earnings on February 23.