Here’s how to trade Yelp ($YELP)…still! (June 24, 2021)

by DAN YELP 
I want to look at Yelp ( NYSE: YELP ) today and this is why I’ve got these drawings here that I was actually using for teaching at stockmarketmentor.com., I will just kind of walk you through it.

Back when the stock first broke out, this is when I started drawing lines as far as what I was expecting, or not expecting but was possible for the stock to be doing and still be acting normally. It broke out here, the first day, and then the next day it gapped down just slightly but then traded higher, closed lower on the day. The breakout would be phase 1 of a 3 stage breakout. And then the second part is, where does the initial breakout end and then the stock correct? It is looking like the stock is correcting now but you don’t know, you don’t know what is going to happen tomorrow, you can only make an educated guess.

My deal was, if the stock comes back down to 40.00, that’s really where it should find support, right here, because that was basically where resistance was back here. The stock should find support at 40.00. If it is doing that, if it pulls back, finds support at 40.00 and then starts moving higher, then I feel good about the trade, I would probably stick with it. I would look at $40.00 as kind of the line of demarcation. This is the Maginot Line, as Cramer likes to call things, where the stock has to stay above there in order for me to feel good about the trade.

Also, one other thing, on a breakout like this you really can’t expect the stock just to keep going and going, as much as you would like for it to, there is typically always a little bit of push and pull. And this is why that happens (here’s a little inside baseball), for whatever reason the stock breaches a technical level and starts to move higher. Retail buyers are buying the stock. Certainly, some institutions are, but frankly, what would typically happen in a case like this during this entire process. First of all, you don’t know whether the stock is going up or down. Institutions don’t tell you what they are doing, at least they don’t tell me, if somebody has that phone number, let me know. They don’t tell you what they’re doing, you can kind of just surmise it by what’s happening on the chart.

This thing had a big move and it’s not falling. So you can’t really say, we’ve got the big money that is selling this stock. You got a little bit there, sure, but the stock has basically been kind of just grinding sideways, it has just been churning sideways for all this time. And so I would look at this and say, well, I don’t know if institutions are buying or selling. Maybe they are kind of doing a little bit of both. But nobody seems to disagree too much, that this $40.00 level is kind of the fair price of the stock. And that is really what we are looking for, an agreement among all market participants as to what the current price is. Over here we’ve had one big disagreement, all during this move we’ve had a disagreement. The price is up, the bears go, nope, too high, they slam it down. The butts go, nope, too low, and they push it back and forth, this is a tug of war. But as this goes sideways here there is kind of an agreement, we’ll call it a little bit of a negotiation, right?

Finally, we get this breakout here and this is where all of the buyers have soaked up all of the supply that was there at $40.00 and they still need more. They have been accumulating it down here as we surmise because the stock moves higher and we say, oh okay, this is a bunch of accumulation. Now, if instead of going up like it did here, instead of going up like this, if it fell down then the assumption would be, the interpretation would be, oh okay, there was a lot of distribution here and this is where the demand was right here, there’s plenty of demand right along the 100-day moving average or this level here. But then suddenly, the stock tanks so, okay, well then the stock has crushed all of that demand and there is still more to go, therefore, institutions must be selling.

Are you getting what I am saying here because this is really important? What I am saying is, you don’t REALLY know, you can think you know, I think I know a lot, but you don’t REALLY know what’s happening with a stock until it does what it does. Everything else is just a setup, it’s an observation, it’s an assumption, it is a theory, it’s a thesis. But then you have to wait for the stock to go, you’re right, or nope, you’re wrong, I’m going the other way, this is what happened. This is the longest explanation of a couple of candles that I can recall ever doing. Anyway, we get this initial move here on volume. And then we get a pullback, still holding at 40.00. Now, at this point you go, okay, crap, this didn’t hold at 40.00. It hit the 50-day moving average but man, I don’t really like that volatility, 8 percent in a couple of days, that isn’t my idea of a clean breakout. So now you are worried about it. Me, I would have sold it, I think I did. I think I actually sold it up here, I made money on the trade but certainly not very much. Then the stock stabilizes here at $40.00.

Now, just kind of watch what happens. So now, this is just a money sucker. For people that are fast traders, oh I want to get it before it breaks out. Now you are just in here slugging it out between yourselves and you are not going to make any money doing this. And so all of this time, and now for sure, everybody is wiped out. So you look at this now, and this whole thing here is a bust. This whole thing is a bust. You look at his breakout and go, wow, that was a heck of a breakout, I think we’ve got money coming. And then over the next week or so, it turns out, no, you’ve got money going. You have to understand this; we’re out of Yelp ( NYSE: YELP ) now, I had it on our Active Trade List, but I remember telling our members to watch it. Just because you’re not in it doesn’t mean you are done with it. You watch the stock and you look for an opportunity.

So now we are last Friday the 18th. This indicates to me, this is really kind of institutional selling, nobody seems to like this stock. Now it’s holding along the 100; I have never really paid much attention to the 100-day moving average until recently, over the last, I’d say, month or two. The reason is suddenly the 100-day MA is relevant, it never really hasn’t been before, at least in my analysis. So here we are on Wednesday, yesterday, and then now here we are today. What I am describing here is, one big money-sucking breakout that didn’t work out but didn’t reverse so decisively that you just say, okay, I’m out of here. I’m out of here, this feels like GameStop ( NYSE: GME ) right at the top. It’s not that kind of thing. And so as I look at this going forward, do you know what I am thinking? I wonder what next week is going to bring? Because as I am looking at this stock this is what I am seeing, I am seeing that we are forming, maybe a wider base than there was before.

Do you see how this stock has based for a couple of months? This is just a continuation of that, so it’s kind of like one big long base like this. I am going to end it here, there is no big climax here except for this, Yelp ( NYSE: YELP ) is not a stock that I would be buying and selling right now, I just wouldn’t do it. I think it’s a money sucker. I think it’s a Vitamix with your dollar bills, but I am trading it, I’m watching it. I am just watching the stock now. I am still watching this stock and I think there is money to be made on this stock. This, right now again, this is the grinding period, where if you made money up here you are all giving it back here.

So instead, just stay away from this stock but trade it. Stalk it, stalk this stock, wait for the right opportunity to buy it. It sure looked to me, frankly, like this was it. This was going to be the big move, that took it out, it is not doing that. So instead, hopefully, we will see this kind of thing. And maybe sometime next month, boom, then we get the squirt out the upside. So the moral of this story, boys and girls, is that you can be trading a stock and you don’t have to be buying and selling it. I am trading a bunch of stocks, I just only own a few of them right now.

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