Groupon (NASDAQ:GRPN) has dead money written all over it. And next week’s earnings announcement isn’t likely to change a thing — just like the previous dozen reports. But because GRPN stock will grab Wall Street’s attention for a day, let’s take a fresh look at its chart to see if there’s at least a trade to be had.
If I wanted to get you excited, I’d mention Groupon’s year-to-date gain of 23% and point out that it’s trouncing the Nasdaq Composite so far. But then I’d have to admit to some sleight of hand and concede that if you go back any further Groupon looks terrible. Days when the broader market is basking at new record highs have to be particularly painful for shareholders tiring of Groupon’s disappointing ways.
Even with the rousing start to 2020, the stock remains a far cry from its 52-week high, let alone its all-time high above $26.
GRPN Stock Chart
It’s hard to analyze the long-term chart of a stock that has lost 90% of its value and come up with anything positive to say, but I do I have a few items bulls can cling to. Groupon stock lost all of its value in the first year following its 2011 IPO. Since then, it’s spent seven years on a circuitous route to nowhere. Hence the “dead money” reference earlier.
Despite last month’s sharp rise, Groupon still finds itself stuck beneath a falling 50-week and 200-week moving average. Furthermore, we haven’t seen a break of a weekly resistance pivot since 2017. January’s rip carried GRPN stock to a crucial ceiling near $3.10. If we can pop above it, then the weekly trend will finally turn mildly bullish.
Momentum is supporting the bid for change. Note the relative strength indicator in the accompanying chart. Though Groupon made a lower low in December, the RSI indicator made a higher low, forming a bullish divergence. If you’re a bull looking for a ray of hope, then this is it.
The RSI provides further reason for optimism on the daily time frame. January’s ascension in price jammed the RSI into overbought territory for the first time in a year. That’s the type of strength needed to turn what has otherwise been a dismal trend higher.
Because I’ve been schooled in the dark arts of technical analysis, I rarely dabble with fundamental data. But it doesn’t take a CFA to spot that Groupon lacks any earnings growth whatsoever. The past four earnings announcements have yielded earnings per share of 10 cents, 3 cents, 1 cent and 1 cent again. That’s a trend headed in the wrong direction, friends. And unless something dramatic changes about Groupon’s story, I see little reason to invest for anything more than a short-term trade.
If the RSI has you itching to bottom fish, then at least wait for a push above $3.16 to bring more significant buyers into the fray. Until then, steer clear.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!