PCLN Follow Up

Earlier I started a partial short position in PCLN, the reason for the partial is $1,000 is nearby and that's a psychological magnet, it's also about 2% risk and in a partial position represents about 1.25% portfolio risk.

There's one thing that's a little counterintuitive about an earnings beat, especially a big one. Wall Street is not about fundamentals and if it was, we'd never have the talent and equipment to compete, it's slightly different than the more emotional side we see or feel, I'd say it's about "Perception".

There's no loyalty there either, do you know how many private equity managers and GS board members likely took Steve Jobs and Cook on extravagant outings to the craziest events we can't even imagine? However when they feel the dance is up, they have no problem cutting these CEO's net worth in half.

The difficult thing about high price and really high multiples is the street doesn't care what you did, in fact the most important part of earnings is the forward looking guidance (that's why a company can beat and still get sold off if guidance was weak), the street only cares about Perception toward what you will do.

When Wall St. felt AAPL reached the top of their game and the IP5 came out lagging the Galaxy S4, you see how quickly AAPL went from "Darling" to red headed step child with a 45% cut to their price?

I think the current market and economic environments are also going to make perception a bigger part of the game as funds really look at the growth potential before they deploy their capital, PCLN had great growth, the question is, Can PCLN keep that growth in share price going? My gut feeling is no and there are things on the chart that tells me others have felt that way for some time.

 Starting from the middle, I  can mark all the small divergences at the twists and turns, but what I want to show is the relative stability of 3C and the price trend and then the sudden change. I know this is a longer 15 min chart, but it could have confirmed by now, it could have made an effort and reached up toward price, this tells me the after hours ramp was useful in letting go of positions / distribution.

The 5 min chart has even more detail and there's  pretty close 3C/price trend confirmation and the obvious positive divergence to the left is so easy to see I had to mark it and it's about the right size for the move up to the July highs, coming down off that move there's the first deep dip in 3C and on the earnings gap up, you can see why the 15 min chart didn't even try to confirm, this chart is not showing apathy, it is showing action in to earnings.

 Intraday PCLN seems to be just sitting there, then there's this dip.

If I take the same chart as above and zoom in close enough to remove the dip that changes scaling, you can see most of the time PCLN is just sitting there, when I see a stock sitting above a gap like that and not doing much, I'm thinking "Churning".

The 3 min chart is interesting because I didn't catch this before, there was a very intentional accumulation zone here and I suspect it was to run PCLN up in to earnings, maybe  hope the AH action takes it to $1000, but when we get to earnings, there's a totally different tone.

I doubt any smart money, even if they love the stock and think it's a bargain, is going to buy it up here and let retail sell them shares at an elevated price. So I'll watch for a gap fill and if I see accumulation in to it, I'll cover the short for now as that would tell me there seems to be some interest in PCLN post earnings.

If I see it above $1000 which I think is inevitable unless things go really wrong in the market and like an Ebb tide, takes all boats lower, then I'll be looking for even deeper distribution signals and that's where I'd add the final half of PCLN.

The daily chart too shows good conformation considering a 13 year trend. It shows PCLN on a discount at the 2008 dip and how smart money stepped up and bought a lot of shares, but that too has changed. No time over the last 13 years has there been a negative divergence like there is now.

If you are familiar with the "Channel Buster" Concept and even basic volume analysis, these Channel Busters always "look" very positive, they tend to end very badly as they often break the top channel and quickly drop to fall through the lower channel.

As far as I'm concerned, the charts are there, the risk : reward ratio is certainly there, it just takes the belief and emotional fortitude to pull the trigger.