Investing in a member of the travel and leisure sector at the moment may feel like jumping the gun. While economic data has certainly improved in recent weeks, all indications still point toward a continued, albeit slower, rate of decline. The problem is that if traders wait too long, they may miss the boat entirely. Take Priceline.com (NASDAQ: PCLN, Stock Forum), for instance; the company is coming off a stronger-than-expected quarterly earnings report, and the shares continue to rocket higher with every piece of improved economic data. With the recent lull in the market's surge higher, now is an excellent time to take a closer look at this discount travel specialist.

In these times of practically nonexistent discretionary spending, Priceline.com's "name your own price" slogan has attracted quite a following. On May 11, the company reported that it banked a fiscal first-quarter profit of $25 million, or 53 cents per share, soaring 89% above the $14 million, or 28 cents per share, that the firm reported in the same quarter last year. On an adjusted basis, Priceline.com earned $1.09 per share, blowing past Wall Street's expectations. PCLN also guided fiscal second-quarter earnings to flat or higher than the consensus estimate for $1.65 per share, with the company placing its range between $1.65 and $1.75 per share.

Since the release, PCLN has soared more than 10%, extending its year-to-date gain to nearly 60%. By comparison, the broader S&P 500 Index (SPX) has added roughly 4% during the same time frame. In fact, PCLN has outperformed the SPX by nearly 20% on a relative strength basis during the past 60 trading days.

Probing deeper into the stock's technical backdrop, we find that PCLN continues to enjoy the support of its 10-day and 20-day moving averages. The equity has not closed a session below this duo since March 31. Furthermore, PCLN has reclaimed potential support at the 115 level. This region provided support for the shares from February 2008 through July 2008, before switching roles and acting as resistance through September. The 115 area could now provide a springboard for PCLN, helping to propel the shares into their next upleg. On a final technical note, the security is currently consolidating its recent gains into support in this area, potentially marking a nice entry point for a long position.

Despite these strong technical and fundamental performances, many investors are still betting against PCLN. On the options front, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.56 indicates that puts easily outnumber calls among options with less than three months until expiration. This reading also ranks above all but 2% of those taken during the past year, underscoring a deep-seated bearish sentiment toward PCLN among short-term options speculators.

From a broader perspective, data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) point toward a similar degree of low expectations for PCLN. Currently, the 10-day ISE/CBOE put/call volume ratio of 2.75 reveals that nearly three puts have been bought to open for every one call purchased during the prior two weeks. This ratio ranks higher than only 8% of those taken in the prior 52 weeks, meaning that options traders have rarely purchased puts at a faster rate during this time frame.

Short sellers are also placing heavy bets against the security. More than 25% of PCLN's float is currently sold short, following a 4% increase in the number of shorted shares during the most recent reporting period. However, a problem for these bears will arise should the equity continue its steady trend higher, potentially forcing them to repurchase their positions in a rush, known as a short-covering rally, in order to limit their losses. With such a hefty degree of short interest open on PCLN, such a short-covering rally could be quite severe, potentially resulting in a sharp upswing for the security.

One caveat to this backdrop is the wealth of optimism flowing from the analyst community. According to Zacks, seven of the 11 brokerage firms following PCLN rate the shares a "buy" or better, with nary a "sell" to be found. The problem with this overly bullish backdrop is that it creates the potential for downgrades that could exacerbate the aftereffects of any negative developments or a broader market pullback. As such, traders entering a long position on PCLN should keep a close watch on support at the stock's 10-day and 20-day trendlines, as a breach of these support levels could be a sign of pending weakness for the shares.