Yelp Inc. operates a platform that connects people with local businesses in the United States. Its platform covers various local business categories, including restaurants, shopping, beauty and fitness, arts, entertainment and events, home and local services, health, nightlife, travel and hotel, auto, and others categories. The company provides local advertising services, including free and paid business listing services to businesses of various sizes, as well as enable businesses to deliver targeted search advertising to large local audiences through its Website and mobile app. It also offers brand advertising services comprising advertising solutions for national brands in the food and restaurant, automobile, financial services, logistics, consumer goods, and health and fitness industries that want to improve their local presence in the form of display advertisements and brand sponsorships.
Take a look at the 1-year chart of Yelp (NYSE: YELP) with the added notations:
YELP has been on an overall decline since its September peak at $87. And during the first 9 months of the chart, you cans see that the stock had also created an important level of support at $50 (green). Once the stock broke that support lower prices followed. YELP is now back up at the $50 level, which should provide resistance for the stock.
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The Tale of the Tape: YELP broke a key level of support at $50 and has now rallied back up to it. A trader could enter a short position at $50 with a stop placed above the level. However, if the stock were to break back above the $50 level, a long position might be entered instead.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach