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Dennis Dick & Joel Elconin

Joel’s introduction to trading was in the Standard and Poor’s 500 Index futures pit at the Chicago Mercantile Exchange. Also, during his time at the CME, he was involved in Index Arbitrage as well...

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Groupon Revisits Important Technical Level of $12

By: Joel Elconin

Wall Street analysts were out in full force Thursday, touting their top picks for 2014. Among those calls, Northland Capital's Darren Aftahi named Groupon (NASDAQ: GRPN) as his top mid-cap pick.

Aftahi maintained his Outperform rating and raised his price target from $13 to $15. He cited product diversification as a driver of new growth and said improvement in its mobile platform will add to the bottom line.

Despite the more-bullish target and higher open, Groupon shares have failed to explode to the upside. The issue, which briefly traded above the $12 level to $12.04, is now trading slightly higher for the session.

Interestingly, Groupon shares flirted with $12 level last week, but were unable to close above the important level. Shortly after failing at $12, Groupon quickly retreated to the lower $11 handle before rebounding on Tuesday to close at $11.77.

Related: Wells Fargo Shares Retreat From All-Time High

In stark contrast to Aftahi's prediction, an analyst at Goldman Sachs has urged investors to exit the issue. In fact, on December 2, the Goldman analyst downgraded the issue from Buy to Neutral and lowered the stock's price target from $12 to $11.

Although Goldman Sachs bottom-ticked the issue -- bottoming at $8.40 on that day and subsequently rallying past its lowered target -- Groupon may be beginning to tire.

From a technical perspective, another failure to clear the $12 level may signal a reversal in the issue and a return to the $9 level. From a fundamental perspective, despite its long-term earnings per share (EPS) of 26 percent growth forecast, its return on equity is still in negative territory.

Finally, the stealth rally from under $9 to $12 in December may have been the result of short covering, as short interest rose to its highest level in the last year during November.

Perhaps investors should ignore the tug of war between analysts and pay close attention to a close above $12 in order to determine if Groupon is a worthy candidate for their portfolios in 2014.

Posted in: Movers & Shakers Technicals Intraday Update Trading Ideas General