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New High Short Squeeze ($PCLN)
Priceline.com has been a winner since breaking past 119 on July 20th, subsequently rising 25% in less than a month. As a stock making new highs with a large percentage of the stock short, the squeeze has been a thing of beauty as PCLN flies past 2008 levels.
Trading in an uptrend above a rising upper Bollinger is an indication that the online reservation business is strong, and that the market expects continued prosperity in this sector. At the risk of sounding like a paid endorsement, I use Priceline’s hotel room bidding service to find great deals on four star hotels, often 30-50% cheaper than advertised rates.
A break below 133.2 would start a secondary downtrend, suggesting profit taking, but PCLN looks like a great investment in a well branded company so long as it can stay above 99.2. In a perfect world, a pullback to the 120’s before resuming the upward path would provide a great entry point, but only time will tell.
Quote Corner
There is no tool to change human nature… people are prone to recurring bouts of optimism and pessimism that manifest themselves from time to time in the buildup or cessation of speculative excesses.
-Alan Greenspan (Fed Chairman 1987-2006, July 18, 2001 monetary policy report to the Congress)
Twitter Ticker ($FRE)
Freddie Mac is hot on StockTwits as the government sponsored mortgage giant surged over 125% after reporting a profit. As I mentioned here, try to ignore public perception, financial companies related to mortgage securitization are prospering; look at AIG and Fannie Mae.
Breaking to multi-month highs with strong volume, FRE is trading in an uptrend above a slightly rising upper Bollinger, suggesting real buying interest. A move below 1.37 would begin a secondary downtrend, but the primary trend will remain intact so long as Freddie holds above .68.
As time passes, more indications of a strengthening economy can be seen, and the market continues to reward risk takers with new highs and broad based participation. Pullbacks will occur, but dips look like buying opportunities as money continues to come off the sidelines.
NASDAQ McClellan Oscillator ($NAMO)
The NASDAQ McClellan Oscillator, a short term breadth indicator, began a downtrend on Wed. Whether this turns into a sustained move lower remains to be seen, but it is an early warning sign that you should be aware of.
To my dismay, I was stopped out of one of my favorite leading stocks, STEC. Weakness in a market leader is never a good broad market sign, so I’m growing a bit wary of more bullish proclamations.
Though the trend is technically higher, it is likely that I will be cutting any positions that are underwater and raising my stops to protect my gains. Tops and bottoms take days, weeks and months to form, so I’m not selling the farm yet. Trade what you see, not what you think.
