Priceline Group Inc (PCLN) has been making moves recently, soaring through key moving averages to trade extremely close to all-time highs. It’s clear that the momentum has acted as a buy signal for many investors who saw the stock stuck in a range for nearly a month, but a closer look at the chart tells us that the recent breakout may not be much of a breakout after all.
I’m sure you’ve heard of Priceline, whether you’ve used it to help book your travel plans or simply seen their commercials featuring William Shatner and Kaley Cuoco on television.
The company is the world leader in online travel and related services, offering services in more than 220 countries and territories on five continents and operating through six primary brands: Booking.com, Priceline.com, Agoda.com, Kayak, Rentalcars.com and OpenTable.
The stock took a hit at the beginning of May for two reasons. First, it was announced that CEO Darren Huston would be stepping down following an investigation regarding an illicit relationship.
Then, just a few days later, PCLN stock reported first-quarter results. While the numbers beat the Street’s expectations on the top and bottom lines, management gave weak forward guidance that sent the shares tanking.
Management said that growth would slow in the current quarter as the company spends more on marketing and as the timing of holidays shifts traveler bookings. The company expects bookings to increase 18% (bookings had grown 21% in the first quarter) and adjusted earnings of $12.50 a share. Both numbers were below analyst estimates of 21% bookings growth and $14.98 a share in EPS.
PCLN Stock Chart
Priceline traded in a range from there, but recent momentum in the name appears to have brought buyers back around.
After initially struggling to break through resistance at the 200-day moving average (the red line on the chart above), the stock was finally able to move convincingly higher on the last day of May. From there, PCLN stock rallied on above-average and increasing volume to not only break above its 50-day average (the blue line) but also trade at its highest level so far this year.
However, the stock failed at the $1,370 area, which has proved to be yet another level of resistance several times in the past. You can see where I’ve circled previous attempts in the chart.
But the silver lining here is that PCLN stock has still managed to hold above its key moving averages amid the recent pullback.
While I like the potential here, I wouldn’t pull the buy trigger just yet. I think we’d need to see one of two signals first: Either a break above resistance at $1,370 and further confirmation of the breakout, or a decline back down to the 200-day moving average.
As of this writing, Matt McCall did not hold a position in any of the aforementioned securities.
