More on PCLN

As many of you know, PCLN was a short trade for our Primary trend "Core Short" positions. The PCLN short in the equities model portfolio was shorted at $761.69 and is still at a 11.71% profit. We have expected a move higher in the market and usually I would cover the short, maybe go long and look to short PCLN (assuming nothing has changed in our outlook) at a higher price, but since we are where we are in the topping process and because of the possibility of a Black Swan event out of Europe, as you know I made the decision to hold on to core shorts (all 6 are still at a profit despite recent gains in the market) and hedge them with some spec. long positions. The idea based on our current forecast is to make money on the longs while hedging the short positions, when the move is over, adding to the shorts for the next primary leg down. Thus far the strategy is working well with longs and shorts all working well with the additional benefit of the hedge, this is only possible because we let the trades come to us; we shorted in to strength and bought weakness, allowing us excellent low risk positioning.

PCLN has had a nice move up the last 2 days, but for the very nimble trader looks like there's a quick downside trade (most likely a pullback), which I personally would approach with puts to get the extra leverage, yet at the same time I would not have a large position size.

PCLN may set up another trade from there in the sub-intermediate long trend.

Here's what it looks like.

 This is the price area in which PCLN was shorted (thick red trendline/arrow).

 This is why, 60 min negative divergence at the top in PCLN (of course much more analysis went in to the trade, but that's the gist of it).

 The 30 min chart which shows the negative divergence at the top also shows a recent positive, while it was other charts that had us looking for a move up in the market and the reason I added the hedges, PCLN clearly is showing a positive divergence suggesting higher prices which is still in line with our analysis on both a Primary trend and sub-intermediate trend.

 PCLN 60 min looks a lot like an inverted H&S base, it clearly broke out of a resistance zone Friday. One other scenario since this Inverse H&S is so visible on such a popular stock, would be a head fake move above resistance before a pullback, perhaps a gap up on a negative divergence which would be an even better entry for a short side trade (I repeat though, you must be nimble and able to watch the trade).

 The 2 min chart shows the tell tale flat price range where we see divergences commonly form and we also have a leading negative divergence today after good confirmation over the last week.

 While I can mark some shorter term divergences on this 3 min chart, the basic trend is in line with price until today, the negative leading divergence is pretty obvious.

Here's a closer view of the 3 min

 I'm thinking a move to $650 would be possible, hence the reason I'd prefer to use some leverage, but I wouldn't take this trade if that were all there was to it, it would be way too speculative.

 The same 30 min positive divergence that sent PCLN higher is also not confirming higher prices, this is a significant timeframe and suggests the potential for more downside than just $650. If this 30 min chart wasn't present, I wouldn't have bothered bringing up PCLN.

As to the possible long trade I mentioned... (I said there are several possible trades here, actually at least 3- 1) the pullback idea mentioned today, 2) there's a sub-intermediate long trade on the chart above and finally 3) there's the Primary short which would be an add to for me on price strength.) 

Above the X-over Screen to avoid false crossovers did a good job at the first X-over as the other two indicators didn't confirm the move down until all 3 went red, now we are close to all 3 giving a long signal, this is in line with what we have been seeing on the 30-60 min charts market wide, so there's also a decent PCLN sub-intermediate long play possible, I would not take it unless the trade came to me. If everything goes according to what I have laid out here, a short trade for a pullback would be trade 1, so long as we see some 3C strength on the 15 min chart during a pullback and the X-Over screen continues to loo good, then there's a sub-intermediate speculative long trade. Finally that move would allow us to short in to strength for a continuation of the Primary downtrend.

As for the Primary trend, here's a long term 3 day 3C chart...

The staging here is near perfect, during 2001-2003 we have a stage 1 base, 2006 saw Stage 2 Mark up, 2010 saw stage 3 Distribution and PCLN is moving in to the later half of that stage (primary top), the only thing left is stage 4-Decline.