GRPN Stock Breaks Out, Has More Upside to Go

by Serge Berger | December 18, 2013 2:59 pm

Shopping website Groupon (GRPN[1]) began to display bullish price action again in recent days, which is putting it in a tight and technically sound pattern.

The company operates a shopping model that shares information on local goods and services across the world, and suffered from a big price decline since its initial public offering on Nov. 4, 2011. But over the past thirteen months, GRPN stock found a bottom and began to work itself higher. Groupon’s IPO initially valued the company at $13 billion, and netted it $700 million of much-needed working capital.

After GRPN stock rallied into a September top this year, it began to slide until it bounced into its 200-day simple moving average (red line) on December 2. The stock rejecting the moving average with a long tail on the day’s candle.

grpn multi year
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On the daily chart below, the rejection of the 200-day moving average can be better spotted. After a few consolidation days thereafter, GRPN stock followed with a strong rally on Dec. 9, thus completing what I call a rocket launch setup.

The rocket launch setup has since moved the stock about 14% higher, bringing it past all the medium-term moving averages and into its mid November reaction highs. In mid-December, GRPN stock also carved out a bullish wedge formation, just below the November reaction highs, which the stock subsequently broke out of on Tuesday, and the upside target of which is currently still in play.

grpn daily (2)
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The upside target of this bullish wedge currently sits at $11.60, or roughly 6% higher from current levels. Beyond this, and depending on the stock’s momentum, GRPN stock could begin to work its way back to the September highs closer to $12.75.

That’s the thing about momentum stocks — once they begin to rise again, odds favor staying on the side of the trend.

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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[3]. As of this writing, he did not hold a position in any of the aforementioned securities.

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