Market Overview

Benzinga Readers May Have Received the Best Groupon Offer Ever

The shares of daily deals service, Groupon (NASDAQ: GRPN), have been publicly traded for five weeks now and it has been quite a rollercoaster ride so far. The shares opened for trading at $28 per share and went as high $31 on the first day. However, within the first two weeks the stock plummeted below $15 and the short sellers, who had predicted a steep decline in the share price, were popping the champagne.

The recent development in the share price, however, is causing extra headache to the traders who are still short Groupon. I wrote an article on November 28th suggesting that based on the relative strength index the stock might be oversold and poised for a short term rally. Since then, the shares of Groupon have soared over 40 percent near $24 per share, making this probably the most profitable Groupon offer ever.

The company recently unveiled Groupon Scheduler, an online appointment service giving merchants a way to manage their schedules and accept bookings directly from consumers. This shows that Groupon is attempting to diversify its business model, as the competition is getting tougher, and for instance, Google's (NASDAQ: GOOG) Google Offers service has expanded rapidly to new cities.

As of now, it is unclear whether the rally in Groupon has been caused by the increased confidence in the company or just by the shorts covering their positions. Either way the company's first quarterly earnings report will be very important, as it shows whether Groupon has been able to improve its profitability and continue adding users after going public.

Currently, the relative strength index suggests that Groupon is neither under or oversold. The stock is currently trading above its 10-day and 20-day moving averages and the 10-day MA is about to cross above the 20-day MA, which could be seen as a bullish sign.

Groupon is currently trading at $23.97, up $1.72 or 7.73% from Monday's close.

ACTION ITEMS:

Bullish View:
Traders who believe that the rally in Groupon is caused by a brighter long-term outlook may want to consider buying shares of the company. Alternatively, the traders who want to get exposure to the entire sector, in addition to Groupon, may want to go long Global X Social Media Index Fund ETF (NASDAQ: SOCL).

Bearish:
Traders who believe that the Groupon shares will be available at a 50 percent discount soon may want to short the stock or go long one of its competitors, such as Google. Also, the traders who think that the rally is caused by the shorts covering their positions may want to wait for another pull back catch a new rally.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

You can follow me on Twitter @TuomoKallio

Posted-In: Global X Social Media Index Fund ETF GoogleLong Ideas Short Ideas Technicals Success Stories Movers Trading Ideas Best of Benzinga

 

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