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While individual investors and portfolio managers evaluate holdings for the upcoming year, one has to contemplate whether or not there will be some profit-taking at year-end. With the broad market and many issues having outstanding performances in 2013, there may be some doubts if 2014 will yield similar results.

One issue, that appears to be under selling pressure is (NASDAQ: PCLN). The issue, which began the year at 620.39, peaked on December 2 (1198.75), which made it just shy of a double, versus the S&P 500 gain of 27%. Perhaps investors are skeptical that PCLN will be able to replicate its historic move in 2013 in the upcoming year.

Since making its high, PCLN has declined over 40 points, or 3.5%, to 1156.04 in Tuesday's trading. This level is just five points from the major support level of 1151.07. Interestingly, that low was established the day after the issue was upgraded from “Buy” to “Conviction Buy” at Goldman Sachs. Also, the target price for PCLN had been raised from 1260 to 1500.

This fundamental news was the impetus for the move in the issue from 1147.09 to 1198.50 in less than one month. After failing at the nice round number of 1200, tepid bulls and aggressive shorts have been selling into rallies. At this time, PCLN has established a short-term bearish technical pattern of four lower highs and four lower lows since peaking at 1198.50 only five trading sessions ago. Along these lines, PCLN has shed nearly 30 points from its all time high close of 1188.92.

From a technical perspective, it is hard to argue that PCLN is developing a long-term bearish formation. However, if the issue breaches the major support at the 1050 level, one could argue there is very little support in the issue until the November 19 low (1110). Keep in mind, when volatile stocks travel through vacuum areas on the upside, the decline back through the lightly traded areas can be even more volatile.

More importantly, beneath 1110 low, there is another lightly traded area all the way down to November 7 low (1020.69). This is the result of the 100 point rally in only five trading sessions back in early November. Even a decline to the 1000 level would only represent a 16% decline for PCLN. Many corrections in stocks can be up to 50%, which would take PCLN to the 900 level.

Long-term investors not willing to part with PCLN shares should be cognizant that if a significant correction takes place in broad market, there is a good chance that PCLN may be the leader on the way down, as it was one the leaders on the up during the markets historic run in 2013.

Posted-In: Movers & Shakers Technicals Intraday Update Trading Ideas General


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