It has been a little more then a year ago that Travelzoo, Inc (TZOO) hit 103.80 after a great earnings report. Over the next 13 months, the stock has lost nearly 80% of it's value on concerns over it's business and margins. Folks betting on a bounce over that period, lost their ass while those shorting the stock were rewarded.
There have been constant rumors of a buyout of Travelzoo, Inc (TZOO) and that has helped keep a floor on the share price. Yesterday Travelzoo, Inc (TZOO) hit a 52 week low of $20.68. Is that the bottom? Time will tell, but the key word is time. Timing a bottom on a stock can be one of the hardest things to do, but if you play it right, you can make some serious money on the calls or puts.
With earnings tomorrow for Travelzoo, Inc (TZOO), we think the bottom is in, and we will see some violent upside over the next few days. We are currently positioned with $22.50 and $25 calls.
In the chart below, notice how the red volatility bands have contracted so much. That's called a "band squeeze," and if history repeats itself as it has so many times, volatility always moves from low to high. That makes a TZOO breakout in one direction imminent.
Disclosure: I am long TZOO.