Priceline Group Inc (NASDAQ:PCLN), after a sharp U-turn in February, is actually back in the black for 2016. In the bigger picture, this has merely brought PCLN stock back to a longer-term area of resistance. And the relative and absolute strength of Priceline has to make us wonder whether it can break higher.
Not a week goes by where during webinars, live appearances or by email or social I get a bunch of inquiries about Priceline stock. Through the lens of investor psychology, this is telling and important.
It’s telling because it confirms that PCLN shares are a crowd favorite, which in turn is important because it means that whenever a breakout in the stock occurs, it may be violent. I can’t understate the importance of being aware of investor emotion around any stock, as well as the broader market.
So, when we look at PCLN stock — which at its February lows was down as much as 25% for the year and has since pushed into the green for 2016 — I sit up and take notice, particularly given its big following by the trader crowd.
Priceline (PCLN) Stock Charts
Let’s start our analysis with a glance at the multiyear chart. Two things stand out right away:
- PCLN stock, on a weekly closing basis, at its February lows once again held its 2010 mother uptrend line
- As a result of the sharp February U-turn, the stock is now right back at a defined line of resistance that has served as an obstacle for the stock since early 2014.
While PCLN stock had some marginal success of breaking past this horizontal resistance zone around the $1,300 area, the “breakouts” were all relatively short-lived and none of them have been able to stick a landing and result in a sustainable move above this area.
Zooming in on the daily chart, we see that a good part of the February gains were the result of a sharp post-earnings rally on the 17th of the month. The momentum of this move ultimately pushed PCLN stock back above its 50-, 100- and 200 day simple moving averages, where it has been consolidating for the past few weeks.
At the same time, this consolidation phase is taking place right below a resistance line that dates back to August 2015. Good traders and investors know to cancel out noise, which in this case for analysis purposes means we should ignore the failed breakout attempt of the stock last October.
Looking at the momentum oscillators, such as the MACD, PCLN stock is hopelessly overbought here in the immediate- to near-term.
However, momentum oscillators can remain overbought for a considerable period of time, which is to say that should PCLN stock be able to push above $1,310 on a daily closing basis, the stock might just attempt a move toward $1,400, which could be the beginning of a more sustainable longer-term breakout attempt.
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