PCLN Update

 First the weekly chart of PCLN, back in 2006-mid 2008, PCLN looked strong technically, volume was rising with the trend, there's about a 500% move there. In to 2010-2011 I believe PCLN was propped up way above any fair valuation as a momo favorite during QE periods, the Primary Dealers flipped Treasuries to the F_E_D with little to no risk, they made billions doing this (a F_E_D golden parachute for the investment banks and insiders) and the PD's took those profits and drove up every class of risk assets, commodities, stocks, PMs and PCLN. The Yellow area is a warning area as the character of the trend changed-this is most probably directly attributable to the Primary Dealers like Goldman, MS and the now defunct MF Global pumping virtually free money in to risk assets-an Investment bank's dream carry trade. Note the momentum in price, but the declining volume-this isn't healthy. This last run in red is very out of character and a parabolic move, this is why I finally shorted PCLN (at least successfully) as these parabolic moves almost always end badly and just as spectacular on the downside as the upside if not more so.

Although I added a long call, I'm not covering the PCLN short.

 I wouldn't expect a large top for PCLN as the parabolic move would usually dictate a quick reversal. In this case it's a small double top and surprisingly didn't see a head fake new high on the second top. Right now PCLN is in the perfect area to draw in shorts, they have read decades worth of technical analysis books that show this exact set up as a high probability/low risk short. Ten years ago or so I would look for shorts that looked just like this, the problem is it didn't take Wall Street long to see what technical traders would do given a certain set up, Wall Street adjusted to Technical Analysis as it became popular around the time of discount online brokers, but Technical traders still read nearly century old TA books that are considered to be the Bible of Technical Analysis and the culture of Technical Analysis through all of these different authors presenting their latest, greatest system has fostered an attitude that goes like this, "If the trade using this system didn't work, it must be because you didn't adhere to the principles of the system", which makes technical traders even more stubborn, following price patterns that once worked well because they were depictions of emotion, but that was when TA was obscure and few people used it and rather focussed on fundamentals and value investing, looking to buy undervalued companies and short overvalued companies. If the last 3 years have taught us anything or more acutely the Dot.Com craze, valuations don't matter, everything is perception.

So being PCLN is in the position it is in today, I wanted to take a look at it after having seen quite a few charts that look bullish in the near term.

 PCLN's daily chart went leading negative very quickly, daily charts don't often see these kinds of divergences that quick, they take more time so this tells me there was a lot of distribution in PCLN in a relatively short period of time.

 The hourly chart confirms the distribution and gives more details on where it occurred.-clearly in to price strength and at the small double top.

 The 30 min chart offers more details about distribution, the second top saw way more distribution than the first top as 3C is much lower at the same relative price point, however on this chart you can see the start of a relative positive divergence and this is where it would be expected. Remember I shorted PCLN in to strength, I didn't chase it as it fell below support. As a reminder I try to stay away from shorting the first break of important support as these shorts are commonly shaken out in a volatility shakeout.

 The 15 min chart, as it should, shows more details re: the negative divergences and the current positive developing. Just as we see the trend of the volatility shakeout so often that it changes the way we enter shorts, 3C is confirming that a volatility shakeout is a high probability outcome. I use to believe in waiting for confirmation like the break of support and then shorting on a failed test of resistance, but with what 3C has shown me over the years has changed all of that as short to mid term moves are more often than not shakeouts, head fakes and other Wall Street controlled set ups rather than the traditional market discounting function which still exists on a much longer term scale, but not so much in the near term.

Finally the move up to resistance today, which backed off (emboldening retail shorts to enter PCLN on what they perceive as a failed test of resistance) shows a positive divergence in to the decline, backing off resistance and there's no negative divergence at the start of the day.

In other words, while the longer term outlook in PCLN looks very bearish (thus my longer term short position there which is not a leveraged short, allows me more room to sit through Wall Street games and with options I don't want to deal with time decay and expirations and I don't believe in using excessive leverage where it's not needed). The near term outlook looks positive and it looks like PCLN will see a volatility shakeout as has been the trend in the market for some time.

This is another example of why it's important to find out what kind of trading style works best for you. If you are a longer term trader and don't have time to watch the stock market all day, you want to enter on strength, get good positioning, high probabilities and low risk. This way you can sit through the games and not have a portfolio loss that causes you to make an emotional decision or a decision that must be made to protect your portfolio, when the decision on the trade should be about the actual trade, not emotions or excessive risk which go hand in hand.

If you are a shorter term trader, you may want to enter the same way and take a nice 14 or 15% gain in a week or two and loo for the next set up. I'm running two different trades at once, but I understand what each trade is, a short term long leveraged position for near term strength and a more important longer term perspective, building short positions in to strength and reducing risk. My actions alone should demonstrate this as I'm holding my longer term shorts rather than trying to trade around them to maximize gains, but run the risk of missing the longer term big move. My shorter term long position is much smaller in size as it is counter to the major underlying trend.

In any case, PCLN looks like another stock that is pointing toward that bounce we have been preparing for.