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TradingBlock provides investors regular market commentary and outlooks from market analysts and educators like Stutland Volatility Group, Dan Sheridan of Sheridan Mentoring, and TradingBlock's own market strategist Tim Biggam. Market analyst outlooks for individual stocks are entered into our... More
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  • Will The Demise Of Priceline.com's Negotiator Coincide With A Sell-off? 0 comments
    Mar 20, 2012 6:00 PM | about stocks: PCLN

    Tim Biggam, TradingBlock (March 20, 2012, 4:15 pm CDT)

    SymbolAnalyst Target PriceTarget Date
    PCLN640.00May 18, 2012

    priceline.com Inc. (ticker: PCLN), together with its subsidiaries, provides price-disclosed hotel reservation services on a worldwide basis with approximately 185,000 hotels and accommodations in 160 countries; and price-disclosed rental car reservation services in approximately 4,000 locations worldwide. It also offers retail airline tickets, hotel room reservation, and rental car services through its Name Your Own Price demand-collection system, as well as vacation packages consisting of airfare, hotel, and rental car components; cruise trips; and destination services, including parking, event tickets, ground transfers, and tours in the United States.

    PCLN has been on a tear lately, rallying nearly 50% just this year. While some of the move is due to an earnings beat and a ratchet-up in guidance, the rest of the move is predicated on a multiple expansion.

    With PCLN now trading at 690, the 9-day RSI (relative strength index), which reached an extremely overbought level at 85 yesterday, is finally curling down, albeit still at a 75 level. The 18-day DPO (detrended price oscillator) reached over 100 yesterday, which is a level rarely seen, again pointing to extremely overbought levels.

    While the equity market this year has been basically straight up every day, momentum stocks like PCLN have been getting hyperbolic even in comparison to the overall market. At some point, I would expect a pullback on the momentum names like PCLN.

    With the stock showing the first sign of weakness in several weeks, and with both fundamentals and technicals stretched, I look for PCLN to head to 640 by May expiration.

    Play of the Day

    Based on priceline.com's (ticker: PCLN) current market price of $696.47 and using a target price of $640.00, a target date of May 18, 2012 and $10,000 of investment capital, below are three options strategies (ranked by potential profit) and a comparative stock trade to consider should the price target be achieved at the target date.

    Click on the strategy name below to access trade details using TradeBuilder on TradingBlock.com. Powered by TradingBlock's TradeBuilder.

    Strategy (click for details)% Return at TargetProbability of breaking
    even or better
    Buy May Put Spread+147%31%
    Sell May Call Spread+115%38%
    Buy May Strangle+36%39%
    Sell Stock+8%45%

    * Click link to access TradeBuilder details on TradingBlock.com. Must have Instant or Actual account. Subject to change due to changing market conditions. Click here to view risks regarding selling stock short.

    DISCLAIMER: This content is provided for educational and informational purposes only. Evaluate any strategy prior to use to understand risk and suitability. TradingBlock does not endorse or warrant any Market Analyst content, service or product. Use this content at your own risk without guarantee or warranty of any kind from TradingBlock. Tim Biggam is a TradingBlock registered representative. He is not compensated by TradingBlock for any market research or analysis services.

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