Amid a very weak first half of 2013 for Latin American markets, MercadoLibre is one of the few positive standouts this year. MELI is a $5 billion market cap Latin American marketplace site (a la EBAY’s original model) based out of Argentina. It’s a 40x P/E stock expected to grow earnings 20-35% over the next 3 years, and the stock has been on a tear in the past 5 years.
The chart originally piqued our interest after its breakout in early May on a strong earnings report. That move higher was a long-term breakout above the pesky $100 resistance level (drawn in red):
The stock moved all the way up to an all-time high above $128, before retracing back down to 102.50 on the most recent market pullback. The short-term chart shows the large volume on the breakout (lower panel, circled in green), and a nice potential long setup on a retracement back to near $100:
The stock is currently below the 50 day ma and in a bit of no man’s land, but given the gap around $103, the rising 200 day ma nearing $95, and the long-term resistance around $100 that likely turns into support going forward, the technical picture for buying MELI becomes quite interesting below $105.
The stock’s next earnings report is on August 2nd, and there is gap risk given the way the stock has moved on past events. Options are not very liquid, so we don’t plan to trade an options structure for exposure. But we wanted to highlight a high-growth name in an unloved region that has an intriguing technical setup to boot.