YELP is another huge momentum winner in 2013, up 242% so far year-to-date. Any sniff of a selloff this year has encountered a new wave of buyers, and the stock has hardly consolidated over the past 10 months. The stock really got going in the summer. However, today’s break lower is the first convincing breach of the 50 day moving average all year:
Today’s break also has not caused too much long-term technical damage, since the stock has held the important $60 support level so far. That was the high in August, and has been support ever since the stock broke higher in September.
However, the stock does have the look of an (albeit ugly) ominous head and shoulders pattern on the 2 month chart:
If the stock does break $60, it will likely be a swift and stinging decline down to the $45-$50 area. The real test for many of these breakout momo stocks is yet to come, as they test prior breakout levels. For YELP, that means all eyes on $60.
If we like the setup in the future for the stock to break $60, we would look to a similar structure as the one we have on in Zillow that would look to isolate a range with a center down at $50 with $60 or $65 possibly being the new upside resistance levels. We’ll be keeping our eye on this one.