Priceline Group Inc.: PCLN Stock Chart is Suggesting a Breakout Imminent
PCLN stock: Booking its Way Higher
Priceline Group Inc.(NASDAQ:PCLN) stock is not cheap on a per-share basis, trading at $1,429 per share. On the surface, that share price must seem completely obscene, but on a valuation basis, shares are really not that expensive. PCLN stock has a price-to-earnings (P/E) ratio of 27.15; this number is not outlandish for a growth company. Priceline stock currently sports a $70.0 billion market cap and the company is biggest player in the space. I feel quite safe saying that valuation is not stretched for this growth company.
Priceline operates a number of segments in the booking- and reservation-related service sector. Some of the brands under their umbrella aside from Priceline.com are Agoda.com, Rentalcars.com, Kayak.com, and Opentable.com. In 2015, these segments generated $55.5 billion in online bookings and justify the market cap.
The fundamentals are not stretched, but that information gives me little indication on the direction that the share price will take next. Perhaps taking a look at the Priceline stock chart will give me better insight into the direction of the current trend.
The following chart illustrates the long term trend in PCLN stock:
Chart Courtesy of StockCharts.com
The uptrend that developed is as clear as day, and is created by connecting the troughs of the price chart. An uptrend is confirmed by higher highs and higher lows; this is the type of price action that defines an uptrend. This trend can easily be identified as the price moves from the lower left to the upper right.
As long as PCLN stock is trading above this trend line, the path of least resistance remains higher, thus its dominant trend is bullish. If price managed to break below this trend line, I would have reason to be concerned about my bullish bias.
The following Priceline stock chart illustrates a bullish signal generated from a momentum indicator:
Chart Courtesy of StockCharts.com
The chart above uses a monthly scale. The signals that are generated from longer-term scales are more significant and eliminate much of the noise that is apparent in shorter-term charts.
The focus of this chart is the in bottom panel labelled “MACD.” MACD is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish signals. PCLN stock has just produced a bullish cross on this momentum indicator. This signal will create a bullish tailwind that will help resolve the sideways trading action.
The following is a short-term chart of PCLN stock using a one-hour scale and that illustrates a bullish price action:
Chart Courtesy of StockCharts.com
Healthy bull market moves contain impulse waves that are followed by consolidation waves. Consolidation waves are important as they allow the market to digest the move higher before the next impulse wave moves the price out the range.
Bullish charts are littered with this type of price action and stop losses can be placed directly below a consolidation wave in order to preserve gains.
Bottom Line
PCLN stock may seem scary and overvalued by its lofty price per share, but that’s not the entire story. The fundamentals are sound and valuation is not stretched, which allows price appreciation from current levels. The technicals are positive and intermediate signals have reaffirmed the bullish bias. I believe that Priceline stock is now ready to set aside the sideways range and move higher. My bias will remain bullish until the charts give me reason to question that bias.
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