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.
Take a look at the 1-year chart of Yelp (NYSE: YELP) below with the added notations:
YELP has been consistently declining over the course of the past year. Over the most recent 3 months the $35 price level (blue) has become very important to the stock. Not only was $25 a key support back in August, but that level has also been hit as resistance a couple of times once he stock fell below it.
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The Tale of the Tape: YELP has a key level at $25. A trader could enter a long position on a break above $25 with a stop placed under the level. However, if traders are bearish on the stock, a short trade could be made instead at the $25 resistance.
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