PCLN in Buying Range

Priceline broke out of a flat base over four weeks ago and promptly traded sideways. This sideways action was exceptionally tight, with only a 6% difference between the top of the pattern and the bottom, and constituted a new, smaller base.


This behavior is constructive and constituted a base-one-base pattern, which can be very powerful consolidations. They indicate big institutional money isn’t selling, but rather supporting the stock in a tight range, storing up energy for another move higher.

Sure enough, PCLN broke out of this pattern last Wednesday and is only about 2.8% above the buy point. I bought PCLN upon its earlier break out, almost five weeks ago. I purchased a call option in it, and thanks to the strange dynamics of time decay, I’m actually down in the option even though I was right in thinking PCLN would go higher.

If you consider taking a stab at PCLN, which is in buy range, know that it’s earnings report is next week. Many traders prefer a nice cushion in a stock before earnings. I’m not always so cautious as I believe a break out on strong volume from a sound basing pattern of a fundamentally strong stock is confirmation enough.

I do confess, it’s always nice to have good amount of profit in a stock going in to earnings.

The chart images are provided by www.freestockcharts.com, which is a great resource. It provides real time data. For researching and planning my stock purchases, I use IBD’s Market Smith package, but they do not let me post their charts online. The arrows on the charts designate PCLN’s breakouts.