Yelp Inc. (YELP) is indicated to open about $2 or so lower this morning. I wrote about YELP on Thursday, noting that "YELP is ready and willing to break out on the upside from its multi-month consolidation pattern. Our intermediate price target is $65. Traders could go long here and on a close above $49. Risk a close back below $45 for now."
With a lower opening the question now becomes whether this was a failure and we should sell and cut our losses? We do not have a crystal ball on where prices will close. Some forward-looking investors may view this as a pullback to buy, while others may see it as a start to a serious decline. I will continue with our initial risk point of a close back below $45. Let's take another look at the charts ahead of the opening.
In this daily bar chart of YELP, below, we can that prices rallied up to $48 in early November, late November, close in March and again this week. The rally failed each time and prices retreated but eventually found buyers before long and tried the upside again.
What is interesting as I look at the chart again this morning is that the duration of each retracement or pullback has become shorter. The buyers are taking less time to mount an advance. Will that be the case this time around? I have no idea.
In this Point and Figure chart of YELP, below, we can see the triple top at $48.06. Today's price action might give us a down column of O's but I do not know that for certain. A rally to $48.54 will be a breakout, however.
On the left scale of this chart is the volume at price information. There is a good amount of volume just below the market and this should be support. Again, we have to see if buyers show up again.
Bottom line: We have an exit plan -- a.k.a. a close below $45 and I would be out. Will someone buy the lower open? Probably but I do not average down. Discipline in trading and investing separates the winners from the losers.