Shares of The Priceline Group Inc. (PCLN) soared nearly 2.5% on above average volume on Friday after breaking out from upper trendline resistance. During the first quarter, the company reported revenue that rose 12.6% to $2.42 billion – missing consensus estimates by $30 million – but earnings per share of $9.88 beat consensus estimates by 99 cents. The company's second quarter earnings guidance came in lower than expected at $13.30 to $14.00 per share. Investors responded by sending shares lower on May 10, but the stock eventually recovered over the following months.
Analysts have been mixed on the stock from a fundamental standpoint. Goldman Sachs raised its full-year price target despite the poor second quarter guidance, but MoffettNathanson lowered its rating to Neutral, citing tough comps and foreign exchange headwinds. (See also: How Priceline Group Makes Money.)
From a technical standpoint, the stock broke out from upper trendline resistance on above average volume to R1 resistance at $1,925.92. The relative strength index (RSI) moved higher to 62.21 but remains below the overbought threshold. At the same time, the moving average convergence divergence (MACD) appears to be bottoming out and may be on the verge of a bullish crossover that could signal a trend reversal.
Traders should watch for a further breakout to R2 resistance at $1,981.33 or some consolidation above trendline support before a move higher. If the stock breaks down below trendline support, traders should watch for shares to move to lower trendline and S1 support at $1,798.11. Traders should maintain a bullish bias on the stock given the recent strength and favorable fundamental tailwinds. (For more, see: Big Price Tags Send Investors to QQQ.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.