Take Priceline Profits Now, Wait for Pullback

Shares of online travel specialist Priceline (PCLN)  continue to fly.

They spiked more than 5% late Thursday and are currently up nearly 6% to $1,438 early Friday thanks to the company's better-than-expected second-quarter earnings. The company reported a 16% rise in profits and a 12% rise in revenue, driven by the international business.

What should you do now? Take some profits off the table and wait for a pullback because the risk-versus-reward scenario has turned slightly negative.

The international business, with revenue of $2.1 billion, now accounts for 82% of total revenue. That means Priceline now relies more heavily on markets where currency pressures from the strong dollar will devalue its sales overseas. Also, from a technical perspective, PCLN has its headwinds to overcome.

Priceline shares are up 6.7% for the year to date, slightly outperforming the 5.9% rise in the S&P 500 (SPX) index. From the TradingView chart, however, you can see the shares had risen about 16% since Britain voted to leave the European Union, after falling near support around $1,180 (green line).

The post-Brexit run placed support back to $1,321 -- an area where the stock has fluctuated since the middle of April. This now makes the Thursday's spike to $1,433 more questionable. Not only does it translate to an almost 10% jump above normal, it places the 20-day moving average (blue line) about 7% below where the stock currently trades. That's not an ideal situation for a stock that now hovers near all-time highs.

While Priceline continues to put up solid revenue growth numbers each quarter, where are the new buyers going to come from? If you own the stock, taking some money off the table would be wise move here.

Wait for the 50-day (currently at $1,314.14 -- pink line) to catch up to where PNCL currently trades. It's at that point the stock becomes a buy. By then, Priceline will have likely reported another quarter that shows the extent to which the international business can withstand currency pressures.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

More from Opinion

Netflix Tanks on Disappointing Subscriber Numbers: 10 Key Takeaways

Netflix Tanks on Disappointing Subscriber Numbers: 10 Key Takeaways

Tesla's Elon Musk Must Realize He Can't Do It All: Dumbest Thing on Wall Street

Tesla's Elon Musk Must Realize He Can't Do It All: Dumbest Thing on Wall Street

5 Things to Watch for When Netflix Reports Earnings on Monday

5 Things to Watch for When Netflix Reports Earnings on Monday

Flashback Friday: Bank Stocks Stay Hot and Tesla Stays Relevant

Flashback Friday: Bank Stocks Stay Hot and Tesla Stays Relevant

Throwback Thursday: Tesla's Risky, Broadcom Slips, Papa John's Jumps

Throwback Thursday: Tesla's Risky, Broadcom Slips, Papa John's Jumps