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Manufacturing Numbers
Posted: February 15, 2008 at 12:11 pm by Chuck
February Empire Manufacturing: -11.7 v prior 9.0. This is the lowest reading since early 2003. The numbers today are certainly not showing strength in the economy, for business or consumer.
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Around Christmas you gave the below analysis of the PCLN chart. Your chart produced a good call at the time. Now it has turned around and looks like it wants to break out to new all-time highs on enormous volume. What do you think about it now? Also…they are into mainly hotels, airfare, etc. Wouldn’t this stock do poorly in a bad economy?
A reader wanted a chart analysis of Priceline (PCLN). And the chart is shown below. Some notes on PCLN:.
PCLN has 38.3 Million shares outstanding, and currently has 7.2 Million shares being held short. This is a very high ratio
On November 29th Credit Suise issued concerns about Priceline’s margins.
On December 10 Fidelity Investments (FMR LLC, mutual funds) cut its exposure in PCLN from 15% down to 9.7%
On November 28th Rose Ronald, CIO of Priceline sold $2,334,450 of stock.
The low share float on Priceline is what makes it move quickly and many low float stocks quickly run up on momentum, this is one of them. Over the past 4 months, while the price of PCLN has been rising, the money flow has been declining. A divergence which is a leading indicator to a shift coming. If you want to trade PCLN on the long side (which we would NOT do) then you would buy when the price breaks over $121.00.
To play on the short side you enter a short position on the move below $109.00. There is already a substantial short interest piling on top of PCLN right now as many traders see the same technical divergence and that it is also over valued in a declining market. The chart action suggests that PCLN will not break to new highs unless there is some kind of positive news between now and their next earnings report on February 12, 2008 to trigger the shorts to cover.
For us, we see this as a potential fast moving downward short play if it fails $109.00. A play on a break above $121.00 on the long side is possible but any pullback to below $115 would be a signal to ‘get out’
Hi Dave-I said before that I like PCLN’s business model and they are gaining market share. Yes, they will suffer in an economic downturn, it just isn’t showing up in their numbers yet.
They reported this morning: Q4 $0.96 v $0.84e, R $334.9M v $329Me
- Guides Q1 eps $0.50-$0.60 v $0.53e.
- Guides FY08 EPS $4.80-5.10 v $4.90e.
- Sees year gross travel bookings $7.0B-$7.3B.
- Guides Q1 gross travel bookings up 60-65%.
For a longer term investment they aren’t a bad company, but not at these prices. The share price is totally out of whack with their earnings. With such a low float, the short shares covered quickly boosting the price easily. However, this is not a market to be playing breakouts.
Thanks for the analysis, Lisa.
Have a great week….