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Is MercadoLibre finishing its upward trend?

|Includes: MercadoLibre, Inc. (MELI)
This Argentinean company is really interesting, many people call it "the eBay of Latin America".

I had some interesting gains with this stock in the past and I track this stock everyday. I am also an active user of the site since 2006. (

In the last 35 days it rallied from 64.90 on March 18 close to 89.94 close on April 21 hitting the record price of 92.49. It gained more than 38%, a lot considering it is a multinational company with around 4B market cap and a solid business.

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During the last week we noted some skepticism in the market despite some good balances but MercadoLibre Inc. (MELI) added little more gains.

This upward trend is showing some signs of weakness and it seems to be finishing, apparently a correction is on the way. Check a longer term chart and see how the 200 day MA acted as support several times but it never went so far of the 50 day MA when it rallied before. Take a look to the overbought signs in the RSI and the MACD.

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Here some numbers for MELI...

Market Cap: 3.97B
Sales: 216.72M
Income: 56.02M
Dividend: 0.36% (announced on last earnings conference)

P/E: 70.82
Fwd P/E: 42.23
P/S: 18.31
P/B: 23.12
P/C: 63.84
P/FCF: 73.14

52 week range: 40.95 - 92.49

Beta: 1.86

RSI(14): 74.67

The stock is currently trading 8.15% above its 20 day SMA, 21.10% above its 50 day SMA and 30.79% above its 200 day SMA.

Only 2 analysts provided opinion for MELI in 2011, RBC Capital Mkts reiterated an outperform grade and rose its target from 67 to 78 on Feb 24 and Brean Murray marked as a buy with a 76 target on March 1st.

In my opinion a fair value for this stock is around 75.

In the very short term I see no matter for MercadoLibre but in a few months its revenues could be seriously affected tracked in US Dollars because the main countries where the company generates income are Argentina, Brazil and Venezuela. Both Argentina and Brazil needs a weaker currency (Peso and Real) to keep their economies growing and Venezuela has serious economic issues that I would not mention here.

Focusing only in the company business I think MercadoLibre should find a way to offer a cheaper service because the users are being charged with a 10% commission for each item sold and many users are finding alternative sites to offer their products or avoiding the commissions via illegal but effective ways.

To play down on MELI stock I suggest buying in the money puts expiring in June or selling out of the money calls expiring in May like the 95, 97.5 or 100 strikes.

If stock plunges under 70 after a correction I recommend buying the stock.

Disclosure: I am short MELI.