More Upside Ahead in Yelp (YELP)

You've got to be nimble to trade this young company

   

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.

yelp triangle formation 300x278 More Upside Ahead in Yelp (YELP)

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.

yelp fibonacci support 300x252 More Upside Ahead in Yelp (YELP)

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.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.


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