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YELP Is Going Down!

3/12/2015

6 Comments

 
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YELP is my next target. I have made some money previously in this stock when I was shorting in the $75 range. Once again this is a lesson in trend following and similar to AVP, I would have been well off doing nothing but letting the winning trade ride. 
YELP went public March 2012 at $15 a share. Exactly like GPRO, TWTR, BABA & most of the recent IPOs, YELP went exceedingly parabolic, cresting two years later 578.5% higher at $101.75 a share! Unfortunately for most YELP shareholders, the stock has been drowning ever since getting cut in half, now trading in the mid $40s.
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Technically the stock is a mess. The Weekly chart has made a massive H&S which measured move projects below prior all time lows. The stock is currently in a well established downtrend and the Price by Volume is indicating that the majority of shares were traded at higher prices than current price, this means that there is massive overhead supply in the stock. I have seen these parabolic moves play out time & time again and the end result always plays out exactly the same! Unfortunately after the initial parabolic move, price very rarely recovers to it's former heights. It is a misnomer to think that just because price has dropped alot from a previous reference point, it cannot drop any further. . Downtrends often surprise people in how long they can persist. 
One very alluring technical draw to the YELP short is the existence of a 'fast zone' or gap in price where very few shares were traded. The horizontal Price by Volume bars expand in areas where heavy volume was traded and contract in areas where very few shares exchanged hands. Areas of thin volume contains less price memory, this means that price can move rapidly through these areas. There is a reason why most gaps tend to get filled by the market, and that is because price moves to the area of least resistance always. 
The Technical reasons alone are enough to short this company but there are fundamental reasons as well. For one the company trades at a ridiculous 97.50 P/E multiple. YELP has no moat and it takes nothing for competitors such as GOOG, AAPL, MSFT, & YHOO to offer the exact same service and crush YELP. It was a novel idea at first but the shine is off it and a stench is beginning to surround the company. In fact there is even a documentary entitled Billion Dollar Bully being made that sheds light to some of the extortion techniques that are the backbone of YELPS business model.
I know the risk parameters of my trade, the black lines represent the bounds. If YELP somehow manages to get above 50 on convincing volume I will cut it but I see an opportunity to ride this stock down to 30. The Risk/Reward parameters of this trade are very favorable as I am risking a 6% draw-down for a potential 36% Gain.
The Market is going to collapse at some point in the near future and until it does, It is a much smarter going after questionable and damaged stocks such as YELP that are already in established downtrends rather than trying to attack leaders such as DIS, AAPL, SHW, etc..
Don't get caught long or you're sure to YELP when this stock gets crushed!
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6 Comments
Paul Link
3/29/2015 03:29:52 am

The author of this article is very accurate. I am the proud owner of a cafe and catering company. Approaching my 19th yr. Yelp has tried to bully me on two separate occasions. Prior to my cafe launch, I traded the 30 yr. T-Bond at the CBOT. I have spoken directly with Kaylie Milliken, the producer of "Billion Dolllar Bully". I have decided to launch a protest march against Yelp in May. The protest will take place in Chicago. I hope the protest goes national. I am admittedly heavily short Yelp stock

Reply
Michelle
7/9/2015 03:14:52 am

I am a small business owner and my competitors are having their customers with yelp accounts post lies to try to hurt my business. My customers have posted reviews but they all get filtered. It's so frustrating. Yelp is destroying small businesses.

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Joe
4/1/2015 09:04:32 am

Is it unrealistic to see this thing go to zero?

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Robert Sullivan
4/1/2015 11:04:51 am

Unlikely to go to zero but certainly not unrealistic to see YELP trading as a penny stock in the near future imho

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Tess
7/31/2015 03:59:20 pm

WEll today it's now in the mid 20's. This stock is tanking. THe author is correct, they have a bad business plan can't have growth without profit. And they fight the business owners their bread and butter gives them a faulty business plan. They deserve to go down the owner is an ass. Don't get on the business owners bad side.

Reply
P Zh
10/20/2015 08:27:38 pm

Yelp is asking me to pay for ads, removing 4 and 5 star reviews for my business! Hurting me mercilessly

Reply



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    R. J. Sullivan IV

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