A LinkedIn Reversal May Be Brewing

 | Feb 09, 2014 | 6:00 PM EST  | Comments
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Stock quotes in this article:

lnkd

Now that LinkedIn (LNKD) has reported earnings, it's time to stalk the stock.

First off, the decline into last month's low amounted to $58.06 -- very similar to the two largest prior downswings, which respectively brought the stock down by $66.72 and $59.07. See the weekly chart below.

LinkedIn (LNKD) -- Weekly
Source: Dynamic Trader

Beyond this key price projection, I'm seeing a very healthy price cluster of at least 10 Fibonacci price-support relationships within a rather wide zone: $188.68 to $199.52. That identifies this area as potential support, or what you might call a possible floor. I've actually broken down the zones into two smaller ones: $197.39 to $199.52 and $188.68 to $195.11.

This may be slightly different from what you see on the daily chart, which offers more price swings for analysis: at least 13 Fibonacci price relationships. Speaking of the daily chart, another reason I'm keeping an eye on this stock is that the daily shows multiple Fibonacci time-based cycles coming together around Jan. 6 to Jan. 9 -- and the stock hit its low on Jan. 7.

LinkedIn (LNKD) -- Daily
Source: Dynamic Trader

Now, returning to the price cluster, even though we're looking at a huge zone of potential support we cannot be fully certain that the zone will hold. Nonetheless, it does mean this level is an important one. So if LinkedIn manages to hold above it, I'm going to focus on watching for buy triggers, as such signals would suggest it's worth placing a bullish bet on the stock.

Bottom line: If LinkedIn is going to resume its longer-term rally, it's right on top of the ideal level where that could transpire. Remember to wait for those triggers, though. Also, risk can be defined either below the low made prior to your entry trigger, or below the low end of the price-support cluster. As always, if the support zone is taken out, I will back off the buy side until further notice.

Let's see if LinkedIn can muster up some strength!

Please refer here for more information on trade triggers, and here for general guidance on Fibonacci trade setups.

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