Priceline (PCLN) Stock: Former $1,300 Ceiling Could Now Be Support Level
NEW YORK (TheStreet) -- There is a role reversal that goes on in the marketplace that chartists are aware of -- old resistance becoming new support on declines or retracements. Yesterday, shares of Priceline Group (PCLN) declined $138 -- or more than 9%. Certainly a sharp move down even for a $1,475 stock, but some perspective is needed.
This first chart of PCLN, above, is a two-year daily chart. This chart shows the price action for PCLN across the $1,300 level. There are some probes above $1,300, but the level largely acts as resistance, halting advances. PCLN retested the $1,300 level yesterday. Also note that prices are still above the rising 200-day moving average.
This chart, above, is just a two-day chart of PCLN. It shows the gap lower Monday morning, but then the sideways price action from 11 a.m. above the $1,300 mark. Granted, this is only five hours of price action, but it shows that traders are reacting to the level so far. We want to see more price action evidence that support holds around $1,300.
Consider this a real-time learning experience in the technical concept of support and resistance.
Check out what other Real Money contributors have to say about Priceline: Ken Goldberg's take is here and Tim Collins' view can be found here.
TheStreet Ratings team rates PRICELINE GROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
We rate PRICELINE GROUP INC (PCLN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth significantly trails the industry average of 45.5%. Since the same quarter one year prior, revenues slightly increased by 7.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, PCLN has a quick ratio of 2.11, which demonstrates the ability of the company to cover short-term liquidity needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, PRICELINE GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for PRICELINE GROUP INC is currently very high, coming in at 91.78%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.67% significantly outperformed against the industry average.
- Compared to its closing price of one year ago, PCLN's share price has jumped by 33.53%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PCLN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full analysis from the report here: PCLN
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.