Options Trading News

July 29, 2011  Fri 12:21 PM CT

Ahead of Priceline.com's earnings report on Thursday, there is a potential bullish price pattern on its weekly chart.

On the six-month weekly chart below, I have highlighted a potential bullish "flag" with sloping orange lines. Those lines define the lower and upper bounds of the current bearish price channel. Flag formations are short-term counter-trend consolidation patterns.

Priceline has been digesting the gains made off the June lows, which saw the stock rise by $100 since that time. Shares of the online travel service have since sold off, down to support near the 10-week moving average, last at $511.63.

As it happens, that moving average defines the low of the channel. The pattern would be voided on a sustained move below that level.

If earnings news is good, the trigger level to watch for the flag is at $542.50. The potential upside for the pattern, if it were to remain active and complete, would be to the $625 area.

One very important aspect to the chart to keep in mind is a potential double top. The current peak was well below the previous high at the $560 area, giving the chart's most recent price action since the April low a classic "M" shape. If earnings or outlook are weak, that formation might well complete down to the midpoint of the "M," as the June low of $450.

PCLN is up 2.87 percent to $537.29 in afternoon trading.


(Chart courtesy of tradeMONSTER)
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