I bought a small position today in Priceline.com (PCLN) today. They announce earnings today after the market closes, and I'm betting on some favorable news.

For one thing, as this AP article explains, a significant portion of Priceline's business comes from Europe. With the weak dollar, that makes for some great potential. Expedia.com, Priceline's main rival, recently beat analyst expectations for much the same reason.

In addition, this is the first full quarter that will include earnings from Priceline's purchase of Agoda.com – an Asian travel search engine – last November. I think this portion of the business is what could push earnings over the top of analyst expectations.

Fundamentally, Priceline has done well in recent quarters. Net EPS accelerated between 3Q and 4Q of 2007, and it's stayed well above 100% EPS growth year-over-year for the last three quarters. The company has come a long way since last year's first quarter loss.

A few recent articles have made some dire predictions. Some dude at Citi downgraded PCLN from "Buy" to "Hold" because they were nearing his target price. I think that was a mistake, but it has resulted in a sell-off over the last week or so, giving me the opportunity I have today to buy near the 50-day moving average (DMA). Since the price has stayed at or above the 50 DMA since they announced stellar 4Q07 earnings in February, I think this is a safe support to buy at. There also appears to be some support around $120, just below the 50 DMA. See the chart below.

The potential I see is that PCLN to break through resistance at around $130, and possibly even make new highs at $135 and above, depending on how much earnings top expectations. Even if Priceline merely meets expectations, I'd expect sideways movement similar to the past few weeks, where one could easily earn 5-6% in short-term trading in the $122-130 range.

If Priceline fails to meet expectations, it could drop to support near $110, or even to it's 200 DMA (currently near $102.50). I don't think such a decline is likely, but it's definitely possible.

Nothing in this post constitutes a recommendation to buy this stock. Please be sure to do your own research and analysis before making any purchases.