Written by William Kurtz
Priceline shares have enjoyed an extraordinary run from their Low of $45.15 during the 2008 Recession to a Close of $959.15 last Friday, September 6, 2013. The question now becomes: Can prices keep on going, or is there an indication that the run is coming to an end?
I don’t see any evidence of an imminent top and price reversal; but concurrent extreme readings in Price and in our Indicators warn of a probable peak and trend reversal not far distant in point of time.
I can count five waves Up, in a major rising trend, from the Low of October 2008 to last Friday’s High and Close. (Five waves complete a series). I’ve labeled the waves 1-2-3-4-5, shown in blue inside yellow boxes. Oftentimes, the height (in dollars or in points) of Wave 5 will be a percentage-multiple of the height of Wave 3. So, when we think we see a completed Wave 4 (every “Wave 4”always being a countertrend move), we can start projecting what the height of Wave 5 might be – and, therefore, the peak price and the probable point of trend reversal.
In the example which is shown on the first chart, not only does Wave 4 (Down) appear to be complete, Wave 5 (Up) is well along.
Frequently, the height of Wave 5 will turn out to be 61.8% of the height of Wave 3.
Here, the height of Wave 3 was $729.81 (measured from the Wave 2 Low to the top of Wave 3). $729.81 x 61.8% = $451.02. If we then add that $451.02 to the Wave 4 Low of $553.42, we will arrive at a projection of the height of Wave 5. In this case, that projection is $1004.44, which is not far above last Friday’s Closing price of $959.15.
The second chart, which is a Daily chart, reveals two open Gaps, which may be Exhaustion Gaps. If so, they can be considered as warnings of a peak and trend reversal soon.
The third chart is a Monthly chart, showing Price and Indicators. It shows that ADX is high; Bollinger Percent B is high; and that there is a “Crimp,” so tight as to be a “Kiss,” between Indicators Chandelle 1 and Chandelle 2. Chandelle 2 has begun to turn down from that extreme tightness. All of these readings are warnings of a Top and trend reversal soon.
The fourth chart is a Weekly chart of the Indicators, which brings us closer to the present time. Here we see ADX (again) at a High; there is a “Blimp” (or “wideness”) between ADX and the Stochastic; Bollinger Percent B is high; there is still a “Crimp” between Indicators Chandelle 1 and Chandelle 2; and Chandelle 2 has begun to fall away. All of these readings warn of the probability of an impending Top and trend reversal, to occur sooner than we might have inferred from the Monthly chart.
Over the course of many years, I have found that extreme readings in the “Chandelle” Indicators are powerful and reliable warnings of an oncoming reversal of trend.
Accordingly, my suggestion is that we keep an eye on Priceline. A top and a reversal of trend may not occur right away, but they’re coming.