Stocks Resting, PCLN Tops, GS Still Trekking

Wednesday, August 04, 2010

Priceline NegotiatorStocks rest yesterday after 3.3% jump from Friday's lower open

The S&P 500 closed a mild 48 basis points lower after gaining 2.2% on Monday. Tokyo and London showed weakness overnight with 2.1% losses in Japan and the UK trading down 78 basis points currently. US futures are trading 30 bps higher pre-market after the ADP jobs data showed a greater than expected gain in jobs. As the week moves on and after the ISM non-manufacturing index is released today at 10:00 AM, all eyes will be on the US government jobs report released on Friday morning.

The Negotiator did quite well in the second quarter! A notable earnings report from Priceline (PCLN) was released last night crushing estimates with EPS of $3.09 versus the $2.65 expected and a strong top line coming in at $767 million versus $733 million expected. Guidance impressed the Street at $4.78-4.98 for Q3 trouncing the $4.18 analyst estimation. PCLN expects revenues to grow 29-34%. PCLN is the new economy, a low-cost, online product that greatly increases efficiencies in the booking and pricing of travel. Shares of PCLN are trading up 17.8% pre-market and bumping up against all-time highs at just under $274. Prior to the announcement PCLN traded 22 times trailing earnings and now sees revenue growth in the 30% range, now there's a good story!

Gold finding footing once again as commodities bounce

The recent spat of weakness in gold throughout July surprised many traders. The most logical conclusion I have read is that the sequential deceleration in inflation and inflation expectations has tempered the need for a hedge, one of the core investment arguments among gold bugs. Yet, the rallies in crude and copper, not to mention many agriculture commodities, may be showing a significant change in sentiment. While the short end of the Treasury curve points to very low inflationary and even deflationary expectations, the recent moves in commodity markets point to the opposite. Either way, it's looking as if I should have covered my gold short when my gut told me to around $114 in GLD. My position is very small so I more or less ignored it but that was probably a bit foolish.

Goldman Sachs (GS) still trying to push higher

Shares of GS have been stair-stepping higher since Thursday's large move to the upside that finally got me committed to the long after a few days of back and forth. The stock has yet to find convincing momentum and it is nearly impossible to be active in shares throughout the day. The open today will be around yesterday's high and maybe today is the day we see some extension. My average price is $149.73 and I will be moving my stops up to the bottom of the last couple days of consolidation around $151 to not turn this winner into a loser. My target remains $160.

Disclosure: Long SPY, GS. Short GLD.
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