Long
Yelp Inc (YELP)
Friday, January 31, 2014
| Company | Symbol | Industry | Rating | YTD % Gain | Target | Stop |
| Yelp Inc | YELP | Internet Software & Services | 9.8 | +9.45% | $83.69 | $72.00 |
The Trade:
Internet Software & Services had a stellar 2013 and is the place to be once again through the first month of the new year. While the hot stocks like FaceBook (FB), Google (GOOG), and Pandora Media (P) garner all of the attention as they break to new all-time highs, some under-the-radar names have emerged as great plays as we head into the second month of 2014.
Yelp Inc (YELP) is one stock that has been "flying under the radar" lately after being spotlight through most of 2013. YELP skyrocketed from $18.85 at the end of 2012 all the way to a $75 open on October 21st. That is good for a +297% gain in just under 11 months! Talk about a momentum trade!
However, following the October 21st top, YELP hit a rather significant consolidation phase. The stock traded a rather volatile range from mid-October to early November, and looked like it was in for a serious breakdown towards the end of November. Normally, after a big momentum move like YELP had, traders knock the thing back down to earth and retrace a lot of the parabolic move. But that's not what happened with YELP.
In December, buyers stepped in around $60 and put up a strong month. Then in early January, YELP broke out of the intermediate-term range to the upside, which is very significant. YELP had a two month consolidation phase for traders to work off the overbought condition, which eliminates the "massive blow up" risk after a big momentum move. It also proves that the rally is still on, and may just be getting started.
Currently, YELP has pulled back a bit from fresh all-time-highs on January 21st to test the breakout. YELP seems to have found short-term footing around the $73-$75 area, and has clear upside to at least the January 21st high.
From current prices, a quick move to the January 21st high would net a gain of +9.11%. A stop at $72 seems appropriate, making the downside risk -6.12%. Thus, even though the stock can be volatile, the potential reward outweighs the potential risk, and the technical picture is working in the buyer's favor.
The buzz surrounding YELP may have quieted as 2013 came to a close, but there is a great trading opportunity here. And if YELP can break to new highs in February, it might be in for another big momentum move moving forward.
Entry Method:
Buy at the current price (~$76.70).
Exit Method:
Sell at a close below $72.00 (Breakdown) / An intraday price of $83.69 or above (Profit-Taking)
Company Profile:
Yelp Inc. connects people with great local businesses. Its users have contributed a total of approximately 36.0 million cumulative reviews of almost every type of local business, from restaurants, boutiques and salons to dentists, mechanics and plumbers. Its platform provides local businesses with a range of free and paid services, which help them to engage with consumers at moment when they are deciding where to spend their money. The Company generates revenue from local advertising, brand advertising and other services. Its products portfolio includes local business, national/brand advertisers and transaction partners. As of December 31, 2012, the Company was active in 53 Yelp markets in the United States and 44 Yelp markets internationally. Effective July 18, 2013, Yelp Inc acquired SeatMe Inc, which is a developer of restaurant and nightlife categories reservation applications.
Stock Rating:
The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest.
Disclosure:
At the time of publication the editor and affiliated companies own the following positions:
None
Note: Positions may be bought or sold while this publication is in circulation without notice.
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