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Playing Priceline's Potential

I'm actually looking at the stock's possible upside as well as a possible pullback to support. 
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With earnings out of the way, Priceline (PCLN) looks more interesting to me. This has been a tough one into the numbers. Although guidance may have disappointed some, the buyers stepped up quickly this morning. While premium has definitely come out of the options, removing the earnings catalyst should solidify the current support and resistance levels on the stock.

Overall, the chart is still very bullish with some potential catalysts in the technical indicators to push it higher. I'm actually looking at playing the potential upside as well as a possible pullback to support. On the downside, if it gets below $1,250, then we could see a push into the low $1,100 area.

I have a hard time seeing it get below $1,100. I like the approach of a ratio put spread being long one September 20 $1,200 put and short two September 20 $1,165 puts for a net credit of $0.80 to $1.00. This puts the break-even level down around $1,130. For those wanting a sub $1,100 break-even level, then the $1,150-$1,115 strikes for the ratio for a smaller net credit around $0.25 would be the way to go there.

Priceline (PCLN) -- Weekly

Source: StockCharts.com

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On the upside, I would tend to go with a skip-strike butterfly or even a traditional butterfly simply to keep capital risk lower. Earnings were good, but not great. Today's price action has been good, but not great. I have a hard time seeing this as a runaway freight train where calls or call spreads might serve best.

Instead, I will look toward a September 20 $1,400-$1,425-$1,440 call butterfly if I can buy it for $3.20 or less. I will target $3.00 with a willingness to give the stock two weeks before I consider bailing. If, at any point, the position were to double in value, then I would immediately take half off.

I'm bidding out for the call play into the last hour and will look for the put spread on a pullback toward $1,300 to try and squeeze a little more net credit from it.

At the time of publication, Collins had no positions in the stocks mentioned.