Last week, a handful of newer Internet stocks acted well both in relative and absolute terms, among them discount shopping website Groupon (GRPN). Unlike many of this new breed of Internet stocks, GRPN has yet to release its earnings — that’s coming Feb. 20.
With last week’s second-half turnaround in the broader U.S. and European stock markets, plenty of stocks that looked lousy at best in the first half suddenly smelled of opportunity for the bulls, including GRPN stock. Now that earnings season is winding down and the January jobs report has passed the test, the next immediate-term hurdle to overcome is Janet Yellen’s testimony before the House Financial Services Committee in Washington on Tuesday … but beyond that, we might be able to focus a little more cleanly on price action.
Speaking of price action…
After ending its ugly slide off the post-IPO highs, GRPN stock began to build a base in late 2012, and after overcoming its 200-day simple moving average (red line) in March of last year, it never looked back. In fact, Groupon has since held the 200-day MA regularly, on any pullbacks, and most recently did so again in last December.
On the upper end, GRPN stock has found resistance around the $12.50-$13 area — a level that the bulls with medium-term time frames should circle.
Last Friday, GRPN stock rallied nicely along with Facebook (FB) and other Internet stocks. So far today, that’s being followed with a breakout past a two-week-long resistance area near $10.90.
Barring any quick reversal lower, GRPN stock looks like it wants to move toward its early-January highs around $12.30, or another 10% or so from where Groupon is trading as of this writing.
With these types of stocks however, the earnings announcement can easily move shares in a big way — in either direction.
As such, I don’t want to be involved in GRPN stock through the earnings announcement next week. But I’ll happily ride the stock higher until then, should the recently newfound momentum be true.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.