Premium Trades 2-21-12

Trade Ideas at the end

It seems that William Shatner was a weight on Priceline’s, $PCLN, stock price. No sooner does he die in a fiery bus crash than the stock heads higher and breaks a consolidation zone. Lets take a look.

Priceline, $PCLN, Daily

Priceline, $PCLN had been in that consolidation channel for nearly a year between 440 and 550 before breaking above it last week. Long enough that all the Simple Moving Averages (SMA) were flat. as it rides higher the 50 day SMA has crossed up through the 200 day SMA, the Golden Cross, and the Relative Strength Index (RSI) is bullish if a tad bit overbought, but not excessive. The Moving Average Convergence Divergence (MACD) indicator is is also positive adding tot the bullish sentiment. The first target for a break over this channel is to 660. it will likely not happen in a straight line though. The weekly chart shows the true bullish picture. that consolidation zone after a run higher from 175 is also a bull flag and the break out higher triggers a Measured Move to 815.

Priceline, $PCLN, Daily

On this timeframe the bottoming and now rise of the RSI is apparent. It is bullish and trending higher. The MACD is also building. The volume is increasing on a relative basis on this entire leg higher, although still below that experienced last year. But backing out to the monthly view gives an even more bullish perspective. If this stock can get over the 61.8% Fibonacci retracement of the major move lower from 1999 into 2000 then there is little in the way of a full retrace up to 990. That is a long way from the current 584.

Priceline, $PCLN, Monthly

My software has a glitch in it so you will have to take my word for it that the pullback on the Monthly chart in 2008 is at the next Fibonacci Arc, and the subsequent Arc crosses the 990 full retracement in June. That gives both a timeframe and a target. 660, 815, 990 are the key levels to the upside. 550, 440 are the keys to the downside.

One of the least aggressive ways to play this is for a move from 800 to 990 in July. Buy the July 800 Calls for 4.80. If that is not cheap enough for you, fund that trade by selling the July 440/400 Put Spread to get it close to free. You have protection of all the volume of that previous channel. If you goes to 990 you can send me a thank you note from your new yacht.

But 800 is still far off. Selling the April 500/470 Put Spread gives a credit of $3.90 and protection down to all the SMA on the daily chart and the round number. It also allows you to buy the April 670/700 Call Spread for only 60 cents instead of $4.50.

And up until then the March 625/650 Call Spread can be had for $6.80. You can fund that by selling the March 540/510 Put Spreads for $6.10 to reduce the cost to 70 cents.

A little more exotic play would be to sell the March 640 Call for $9.40 and buy the April 640 Call, a Call calendar, for $16.90 or a net debit of $7.50. Sell that same April 500/470 Put Spread for $390 if that is too expensive. This is a bet that it hits 640 after the March Expiration and keeps going.

Earnings on the 27th are unlikely to impact any of these trades materially unless it move more than 10%. That means you can put them on now or wait if you are more comfortable doing so.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog