The Price Is Right for Priceline Group Inc (PCLN) Stock

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After a brief post-election tantrum, cooler heads are finally prevailing in technology stocks. The likes of Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Priceline Group Inc (NASDAQ:PCLN) are finding their footing. And while the former two breached key support levels during the tech tankage, the latter did not. In fact, the PCLN stock dip ushered shares to a tantalizing buy point. Allow me to break it down for you.

The Price Is Right for Priceline Group Inc (PCLN) Stock

Source: Priceline.com

First, Priceline stock has had a fantastic back half of the year. The Connecticut-based travel company wowed investors with better-than-expected earnings earlier this month.

And PCLN was rewarded with a rousing overnight jump that carried shares to a new all-time high at $1,600. For spectators loath to chase, last week’s bout of profit-taking was just the ticket to bring shares to a lower-risk entry point.

The attraction of Priceline’s current perch is due primarily to the pair of support levels looming close. First, it just filled the earnings gap. And technical analysis 101 states that filled gaps have a strong tendency of acting as support. And, well, with PCLN’s two-day rally we already have confirmation that buyers are stepping up here.

Second, PCLN’s pullback carried shares to the rising 20-day moving average, which is a renowned gathering ground for dip buyers. Their zeal for accumulation has been made manifest this week since the stock’s descent was stopped dead in its tracks right at the 20-day.

Bank With This PCLN Stock Trade

While the Priceline stock setup is one of the best in the sector, there is a chance selling pressure persists in tech land. As such, let’s structure a high probability trade to profit even if the stock stumbles a bit before rising to new heights.

Sell the Dec $1420/$1410 bull put spread for $4.86 credit. The short put vertical spread consists of selling to open the Dec $1420 put while buying to open the Dec $1410 put for a net credit of $4.86. The max gain is limited to the initial $4.86 credit and will be captured if Priceline stock sits above $1420 at expiration.

The max loss is limited to the spread width minus the net credit, or $5.14, and will be forfeited if PCLN falls below $1410. To minimize the loss, I suggest bailing if the stock breaches $1420. Also, PCLN options have a rather wide bid-ask spread, so be sure to use limit orders.

At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/11/priceline-stock-pcln-option-trade/.

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