Market Overview

Yelp Continues to Surge After Lock-Up Expiration; Short Interest Rises

One week ago, Benzinga highlighted Yelp (NYSE: YELP) as a stock to watch after the name exploded despite the expiration of its IPO lock-up. Heading into the lock-up, YELP had a very high short interest, as traders expected insiders to dump shares once they were legally able to do so. This did not happen, as most of the company insiders and early venture capital and private equity investors chose to hold onto their stakes. The result was a huge short squeeze last Wednesday, which pushed the stock up better than 20 percent.

After holding steady on Thursday and Friday, YELP broke out once again on Tuesday. During Wednesday's trading session, it appears as if short-sellers are trying to cover their wrong-way bets in the stock as YELP has climbed more than 6 percent once again. The stock is now up a whopping 41 percent over the last 5 days and the technicals in the name have turned decidedly bullish.

A key level in the stock will come into play between $26.00 and $26.50. A convincing break of this resistance area will send YELP to new multi-month highs. The stock's short float has actually climbed over the last week despite the massive move in the name. Currently, around 45 percent of the float is sold short versus around 32 percent last week. Given the staggering short interest, it is clear that the Street believes YELP will reverse its recent gains soon.

This is a very dangerous game, however, and with so many traders on the short side in the stock, more explosive rallies are a definite possibility. Short-term traders could watch this stock and play any upward momentum from the long side based on the idea that at some point the short-sellers will be forced to pare back their positions or risk ruin. Conversely, the stock is coming up on a resistance level and many traders appear to be positioning for a pullback, so this is probably not a name to buy on weakness. Continued strength, however, could be bought as a short-term trade in YELP. In any event, expect this name to be very active once again throughout the week.

Posted-In: Long Ideas Short Ideas Technicals Intraday Update Movers Trading Ideas Best of Benzinga

 

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