Priceline.com Incorporated (NasdaqGS: PCLN)

Priceline.com Incorporated is a global online travel company that offers its customers a range of travel services, including the opportunity to purchase hotel room reservations, car rentals, airline tickets, vacation packages, cruises and destination services in a price-disclosed manner. It also offers its “Name Your Own Price” service that helps its customers to use the Internet to save money by allowing them to make offers for travel services at prices they set, while enabling sellers, which include many of the domestic hotel, airline and rental car companies, to generate revenue. It offers its customers hotel room reservations at over 150,000 hotels worldwide through the Booking.com, Priceline.com and Agoda brands. It offers customers the ability to make hotel reservations on a worldwide basis.

Please take a look at the 1-yr chart of PCLN (Priceline.com Incorporated) below with my added notations:

Back in February PCLN broke out through a key 52-week resistance level (black) of $550. Since then the stock has rallied significantly, and over the last 3 months formed what appeared to be a Double Top price pattern (red). Double Tops are reversal patterns and are as simple as they sound: Rallying up to a point (T), selling off to a support, and then rallying back up again to approximately the same top (T). As with any price pattern, a confirmation of the pattern is needed. PCLN confirmed this pattern in mid-May by breaking the $675 support (navy) that was been created by the Double Top pattern. You can see how the stock has retested that $675 level as a new resistance over the last couple of days.

Chart patterns can also provide price targets. Simply take the height of the overall pattern and add or subtract that amount to or from the breakout or breakdown point to get the minimum price objective. For example, since the Double Top pattern for PCLN is $100 high ($775 – $675), PCLN should fall to a minimum of $575 ($675 – $100). Since $575 is so close to the $550, the stock could fall all the way back down to that breakout level. Chart pattern price targets are certainly not guarantees, but they are often fulfilled.

The Tale of the Tape: PCLN formed a Double Top price pattern and confirmed it when it broke the $675 support level. The stock should be moving lower overall, thus a short trade should be placed at or near $675 with a stop set above that level.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!
Christian Tharp, CMT