Priceline (PCLN) continues to move higher. But the daily chart isn’t the most important chart. ..
Discussed in this article: priceline.com Incorporated ( $PCLN )
Today we’re going to take another look at Priceline ( $PCLN Priceline.com Inc ). Previously I looked at Priceline ( $PCLN Priceline.com Inc ) noting that the stock was moving higher, and was on a breakout.
Okay, that’s great, so what do we do with it? You should look at the daily chart, if you’re a short-term trader this kind of move can’t be ignored. You can’t ignore the fact that this stocks right up at resistance, so we’ve got a breakout. Do you really want to buy a stock that’s up this high? Sure it could keep on going and as we know it did. But it’s really a risky buy, not to say that risk doesn’t pay off, typically the only reason people take high risk is because they’re looking for high rewards. If you’re not looking for high rewards then why take the risk?
My point on this was, that while the daily chart looked pretty good, it shows a volatility expansion; in my view the real analysis here is on the weekly chart. You can see this nice little bowl that Priceline ( $PCLN Priceline.com Inc ) has been carving out for a while, it’s been going back for over a year, but this is really what I’m seeing. Let’s do a real easy, quick measured move. Just because I have a hard time with math I’ll use round numbers. Let’s say the base here is at $550.00 of this bowl pattern. We’re going to say the breakout was $775.00 that would have been just today.
So what’s the difference between these two prices? Well, that would be $225.00. So we add the depth of this base to 775.00 and what do we get? Well, magically we get $1000.00. My bet is this could take a while or it could happen tomorrow; it’s not going to happen three weeks from tomorrow. My bet is that over the next, we’ll say several months or even a year, you’re going to see Priceline ( $PCLN Priceline.com Inc ) continue this little breakout and ultimately test a thousand, that’s the way I’m going to be trading it and that is my price target.
Now you know my long-term view of it and so I’m going to go back to the daily chart. If that’s my long term view then do you really think I care if Priceline ( $PCLN Priceline.com Inc ) comes down to $750.00 or so? No, I would actually look at that as an opportunity to add more. Over at Option Market Mentor we’ve got a similar trade going on ConocoPhillips ( $COP ConocoPhillips ). The weekly chart was really the prevailing chart and we are up, I believe we’ve got a negative cost basis, meaning we’ve actually gotten paid for buying some January 62.50 calls by just trading around that position using higher priced options; but that’s for another day and another venue.
The bottom line is this, if you’ve got a short term mindset then fine, here’s your chart, maybe even the 15-minute chart, set your stop somewhere around there if you are short term trader. That’s not my deal on this; this is a big anaconda, any stock price that sells for $777.00 is either Berkshire Hathaway ( $BRK.B Berkshire Hathaway Inc. ) on a real deep discount or a stock like Priceline ( $PCLN Priceline.com Inc ) or Google ( $GOOG Google Inc ). In those instances I like to use the weekly chart because I think you can make more money