Yelp is now a high-profile stock. Here’s how to trade it.
Discussed in this article: Yelp ( $YELP )
Let’s look at Yelp ( NYSE:YELP ). There are two ways to buy this stock; first you want to be long the stock. I look at this and it’s very extended above the 50-day moving average. The 50-day moving average is there; it had been there, so you can see it’s accelerating the slope.
And then we see this big explosion, then another big explosion. Here we get a big pullback, not really like we saw here, it was really more of a sideways drift, but we get a pullback. Now we’ve got a squeeze, I’m leading to something here, and a breakout.
Look where all the volume was. This stock had been working nicely; just kind of drifting up here, look at how low the volume was though. Then we get a big day, Boom! There, the stock moves up, nice big move, but nobody’s really paying much attention to it, other stocks are getting all the play; still the stocks moving up. So down here, $16.00 or so, $16.00, we get clear up, at least a $10.00 move, stealth move, nobody saw it.
Then we get a big move to the upside, everybody’s looking at it. Then they take it off the radar again, and what does that give us? Another $16.00 move before people are really starting to look at this stock.
So now Yelp ( NYSE:YELP ) has the market’s attention, it’s being traded more, and that’s a good thing. It’s more liquid, but it also means that, in my view, the charts going to be a little easier to trade, because we already know this thing is trading in high volume, which means that the typical crowd psychology and chart patterns are going to work, and that’s really important.
So what do we have here? We’ve really got, in my view, two buying points here. First, actually a move above Wednesday’s high, because this stock again, it’s its in the news, everybody’s looking at it. If the stock breaks out to the upside you’ve got to be an active trader, active traders only, because this will be a high maintenance position.
So if it breaks out to the upside you go ahead and buy that, it’s a pure momentum trade. The better trade, the trade that I would prefer is if we happen to have a really lousy day in the market, I don’t know, maybe bad news, maybe somebody gave a bad review on Yelp ( NYSE:YELP ), on Yelp ( NYSE:YELP ), I don’t know, maybe it gets a downgrade.
But if the stock falls down to say $55.00 or so, 20-day moving average, that’s a better time to buy Yelp ( NYSE:YELP ), because you can be more aggressive. You’re buying on the pullback, you’re not concerned about buying it at the all-time high, just before this stock tanks.
So Yelp ( NYSE:YELP ) is a stock that you want to buy, you want to have it in your portfolio, everybody else is, look at the volume. So the question is not whether you want to buy it, the question is how are you going to buy it right?
So again, a breakout to the upside, above this level here, that’s a high momentum trade, buy that stock and watch it. A pullback, this is not a high momentum trade, this is a nice bounce, it’s a zigzag. Zig, zag, zig, zag, buy the zag right when it goes to the zig. So those are two ways that we can buy Yelp ( NYSE:YELP ).