Online urban city guide Yelp, Inc. (NYSE:YELP) just flashed a buy signal. Here is what I am seeing.
On Dec. 4 I opined right here that Yelp was then offering a good risk/reward short-side trade for the quicker hitters. Two days later, and 8% lower, the stock came within 50 cents of reaching my final target (near $17) and given the daily candle the stock left on Dec. 6, it was prudent to take either full or at least partial profits in the trade.
Ever since the Dec. 6 lows, the stock has displayed respectable strength, which now looks like the stock has another 7% upside.
Yelp went public in the first quarter of 2012, and has had a choppy trading history so far as a public company. Starting with the rally off the November lows and the ensuing consolidation however, the stock formed a nice bullish triangle. On Jan. 2 the stock rallied along with the broader market on the fiscal cliff jubilee and broke out of the triangle.
Looking at it a different way, on a daily closing basis the stock found support twice near $18, which coincides with the 61.80% Fibonacci retracement of the rally that started on Nov. 15. Since finding support at $18, the stock has rallied strongly and is now bumping up against the late November highs at $20.60.
Given the general chasing higher of the market, the stock (along with the broader market) should have enough strength in it to push past the resistance point at $20.60 sooner rather than later. A simple 23.60% Fibonacci extension of the November lows up to $20.60 gets us to an upside target around $21.50, or 7% higher from yesterday’s close.
All in all, it’s very early in the year, and since I am not one to force trades I see no reason to over-trade in the early innings. Plenty of high probability setups will come our way again in 2013.