We hoped for a pullback in Priceline (PCLN), but didn’t get it. That’s OK. It’s "chasable…
Discussed in this article: priceline.com Incorporated ( $PCLN )
Today we’re going to look at Priceline ( $PCLN Priceline.com Inc ). I mentioned this last week in a Free Chart video. The company announced earnings and it was actually trading down quite a bit in the after hours, I think around $730.00, something like that. I suggested, why don’t we just kind of hang back, wait, see if this stock will tag the 50-day moving average or get down somewhere around here so you can buy it closer to the mean, the average prices here, and then just be patient.
Well, instead the next morning the stock opened up, did not open down, so those folks that were buying after hours were pretty smart, those that were selling probably regretted it. But you can see how much the stock ramped, almost four percent. If you’re long calls $28.00 is not a bad move. So what do we do now?
Look, this daily chart shows the stock is being pretty overbought. You look at the volume, it was massive the only way a stock moves like this, with this kind of volume, is when institutions are active. Here, because of the price direction, institutions are actively buying it. But this chart doesn’t really tell the tale for the long run; this one does. What I’m really talking about is this area right here, it’s really important when you’re trading, I don’t care even if you’re day trading, you’ve got to have at least two time frames that you’re looking at, typically four actually entering and exiting positions. You should have more than two and my distinction is between decision and action. You make a decision typically based on a wider lens, in other words a longer-term chart. Once you make a decision, yes I want to buy or yes I want to sell, then you zoom in and look at the daily chart and even ultimately the intraday chart. You can start at the hourly, zoom down to thirty minutes, look and see when the right time might be to buy. Then keep going down to the fifteen, you can see what happened, it just kind of trickled sideways, and then finally the five, and you say, “Okay, well this is the right time to buy this stock,” and then ultimately even down to the one minute chart to execute it.
Now Priceline ( $PCLN Priceline.com Inc ), not really too good after-hours here, but prior to, you had a pretty nice move. The point is not to dissect the price action intraday or even on a one-minute chart; I mean that’s kind of silly. Really I’m just trying to explain to you that you make a decision based on one chart and then you’re like a surgeon, you get out the scalpel and you start doing some really fine detailed work to make the actual buy. But here, this is the chart that matters. If you have a longer time horizon, like between now and next Wednesday, this is a stock that you want to own because of this little bowl pattern here. My bet is it’s ultimately going to resolve to the upside. It seems kind of silly for me to even say eight hundred is probably going to be tested.
The reason is, because you can see the uptrend. If you just move the decimal point over its $76.54. You’re not really going out on too much of a limb when you say; I think the $76.54 stock is going to hit $80.00. But I would say, I’m going to say, that certainly eight hundred is going to be tested; but my bet is, because of the way this stocks trading, you’re going to get nine hundred this year and I think it’s actually going to be pretty easy to do.
So my admonition, my caveat is, you have to have a longer timeframe. If you’ve got a real short time horizon, you’re buying the stock up $28.00; then if the stock pulls back $10.00 you’re going to be looking at me saying, “Well thanks a lot for the trade Dan, really appreciate it.” I’m saying this is more of a longer-term position, it’s more of an investment. If you don’t have an investment mentality and aren’t willing to hold a stock like this for several months, then don’t listen to what I’m saying here, because that is exactly what I’m saying, this would be a multi-month hold. Start small if you want, because I don’t want you to take such a big position that if or when the stock does come down to seven fifty or so, which would basically just put it right underneath the upper Bollinger Band, if the stock comes down $15.00 and you get shaken out, then this is not your trade. So start small or not at all.