Here’s the measured move in Yelp (YELP)
Discussed in this article: Yelp ( $YELP )
Here’s an exit idea on Yelp ( NYSE:YELP ); this has been a real popular stock for obvious reasons, look at the middle of last year, it had a breakout above 32.00 now it’s knocking at the door of 100.00. Let’s apply just a basic measured move to this, this is what I’m really looking at; I’m looking at this stock, okay Friday, sell-off, 3 percent, that was only one day and we’ve seen it before. I’m looking at this stock thinking, okay, how do I plan might exit on this trade? Do I just sent a trailing stop, which I can do, but let’s look out in a little bit more clearly.
This was the last support level down here, this was the last resistance level, so we kind of draw a box here, I just use basic mental math with round numbers; we had a low of 56.00, we had the breakout level here at 75.00, so let’s say this stock went one dollar lower, it went down to 55.00. So 55.00 low, 75.00 high, we’ve got a $25.00 trading box. Once you get the breakout what you want to do is, I applied this to Tesla ( NASDAQ:TSLA ) and got a $172.00 price target using this same type of thing, you take the width of the box, which is 25 points, and you add it to the $75.00 breakout level, and what do you get? You get $100.00. That’s where I would look to see some more selling, at $100.00. As I see this I would look at it this way, this stock went up to 99.99; it basically hit that $100.00 level. Now you can stay long, and I’m not saying that this stock is going to move lower, what I’m saying is, this measured move has been completed, it’s done.
Typically, on measured moves like this, it is a minimum price target; it’s not a maximum price target. A lot of people make that mistake, I can just see the tweets now; the stocks up to $110-$120.00 and I got someone tweeting at me saying, “Hey, how did your short go on Yelp ( NYSE:YELP ).Or you were so stupid or so wrong on Yelp ( NYSE:YELP ), that it was going to stop at a $100.00.” I’m not saying it is; what I’m saying is, it’s failed here before, it’s moving lower now, this is where supply lives. Supply lives at a $100.00, sooner or later supplies going to move out, its going to move elsewhere in a may move up to 105.00 or 110.00.
What I’m suggesting is this, if you’re long the stock just understand that this measured move has occurred, use Friday’s intraday low of 91.00, and then you’ve got to look and say, okay well then if I’m going to set my stop just a little bit below $91.00 then maybe I need to set up below $90.00, because that’s kind of a logical bounce point. And if I’m going to do that maybe I need to set it below $89.00 because that’s where the 20-day moving average is, the middle Bollinger Band. Then you’re going to look at that and say, “Well that’s not working either because look what happened here, the stock traded below this 20-period moving average for a couple weeks, about a week and a half, and then a broke out, so what the heck am I going to do?”
What I would suggest is this, because all of these things are valid, I used to be an attorney, didn’t like it because I had to work with too many attorneys, and you know how that is, but I can argue both sides. What I’m saying is, use some risk management here, if you’re holding this for the long-term, stop video now, because the stocks in a nice, nice uptrend, it’s probably going to continue. But if you’re a short-term trader and you’ve been trading this move or this move out at the volatility squeeze, set a stop on half of your position, a little bit below $91.00; then you can deal with the other half based on what the stock is doing. But if you bought the stock at 80.00, 70.00, 75.00 or if you’re just wondering how these measured moves work, watch the $100.00 level, because again, that’s the minimum price target, but it is a price target nonetheless. By the way, if stops get here and Yelp ( NYSE:YELP ) pulls back to the low 80’s, in my mind that’s one that you want to buy, if the stock bounces.