New Trade: Long YELP

I bought a starter position in YELP today. I like the business, and I also like the technicals. I started considering it after @ragincajun and @the_real_fly
were taking about it.

Here’s the daily chart:

20120321-234232.jpg

I like the consolidation here under $24. I also like that price is still above the initial IPO trade price. I also like that it has been creeping up slowly lately, a few percent at a time. I bought at $23.20, and placed my stop at $20.20, underneath the recent swing low. I decided to enter at the price I did from the 5 min chart, as we retraced to the day’s VWAP:

20120321-234615.jpg

I intend to hold this for at least a few weeks as a position trade as long as I don’t get stopped out. I would consider taking partial profits at a retest of the $26 high, and I will also consider adding more shares later if the stock acts right by making new highs.

Tags: , ,

12 Responses to “New Trade: Long YELP”

  1. Greg P Says:

    I have asked you in the past. What is your strategy? With each trade, explain exactly what you liked about it, why you entered, exited, etc ….

    So, you appear to be documenting some of the details of the trade (exit / entry), and that is good. But OMG, what is your strategy ?

    What exactly do you like about this stock? Sounds like you still have no strategy and are really just following others into a trade and company you do not fully understand.

    Look at the fundamentals of the company. Is this really a company you would want to own a part of ? Even if it is only for a few weeks ?
    http://finance.yahoo.com/q/ks?s=yelp

    Yelp is just a slightly smarter search engine. you had better hope that someone buys them out, before some else builds a slightly better search. Not a company I would “invest” a dime in.

  2. Greg P Says:

    Would you rather pay $115M for a company that can make $56M and has $15M cash and $4M debt with a margin of -2%.

    Or would you rather pay $1.4B for a company that can make $83M with $21M cash and no debt with a margin of -20%?

    compare DWRE with YELP. Not recommending either, but what exactly do you like about Yelp?

  3. Greg P Says:

    http://www.businessinsider.com/are-yelp-reviews-reliable-2012-3

  4. Prospectus Says:

    All right, here goes:

    My strategy is to buy a recent IPO with potential to rise based on public perception of future value. I haven’t read fundamentals and I don’t really care in this case. I’m trading a stock, nothing more. This strategy is simply about a belief that as (if) the bull market continues, there will be buying pressure in the stock. I’m thinking only one step ahead of Jimmy McFundmanager. Perhaps that doesn’t fit your definition of a strategy, but it makes sense to me.

    I definitely understand the trade and I understand all I care to about the company. I’m not looking for an investment, and frankly I think there’s no such thing anymore. The fraud is still too rampant. You can’t believe anyone’s numbers. They’re all fraudulent to some extent anymore.

    So I believe there is perception out there that this name will be growing in involvement with AAPL as well as other efforts. I’m buying in anticipation of that. If I’m wrong about that strategy then the trade will not work out. If the general bill run ends, it will probably not work out.

    The other company you mentioned looks better on paper, definitely. But I care more about name recognition here than financial performance of the underlying company. I’m not buying on fundamentals. I’m just trading a name people recognize, but on a timeframe of weeks instead of minutes.

  5. Greg P Says:

    Not entirely relevant to the trade, but I am a bit confused why the title of your site is called “Read The Prospectus”, when you state you have no intention of reading the prospectus, the financials or even the reviews of the company.

    So your strategy is the greater fool game. You are assuming you are not the greater fool already.

    You are trying to play the money printing, low interest rate induced rally with a money losing social networking gimmick website. Sorry but that makes no sense. When you say “general bull” market, are you talking about the social networking bubble rally or the money printing, low interest rate induced credit bubble rally?

    If this company grows, it will probably grow its expenses in step with its revenues and in that case it will only be growing its losses, like many of the bad social networking companies out there.

    This strategy is poor, you might win on this stock, as you might be only one step ahead of another fool, but eventually you will end up being the fool.

  6. Prospectus Says:

    I took the online persona of Prospectus years ago. I chose it because it sounded cool, was financially related and unique. I blogged at Move the Markets for years. When that got shut down, I started my own blog. Prospectus.wordpress.com was taken, so I used “read the Prospectus” as a play on the term, meaning read my blog.

    I guess you could call it the greater fool theory. I think it’s not regular fools driving the markets here. The institutions WILL keep ramping the markets thanks to Uncle Ben. I totally agree that the whole thing is a debt bubble, free money bubble, and the social media hype. I’m not buying YELP to own it. Just a trade. If I’m the last fool in the room, I’ll stop out and that’s that.

    I have other investment accounts for retirement. They are positioned in a more conservative, fundamentalist point of view. These trades I place here are with my tiny active trader account.

  7. Greg P Says:

    Fundamentals matter. I bet you wished you owned DWRE instead of YELP now.

    Never follow others into a trade, and never do it based only on technicals and sentiment. I already know you do not have a strategy, but the above rules should be a part of any strategy you do create.

  8. Prospectus Says:

    I’m not in YELP anymore. Apparently the only real strategy is fundamentally driven to you?

  9. Greg P Says:

    Everything is eventually driven by fundamentals. You can fool yourself and your accounts by riding a momentum stock higher for a long time before the fundamentals remind you that were going counter trend to the underlying fundamentals. Give yourself half a chance by at least picking stocks that you would not mind holding for longer term (in case you could not trade for an extended period [coma, bank holiday, etc …]). Going long shit like YELP and GRPN, you are reducing your chances of a profit considerably. If you are going long, make sure that you pick stocks that can give you surprises to the upside, rather the downside. What can happen to the company that would possibly give you an upside surprise, other than some arsehole blogger pumping it higher for you? Always be looking at your downside risk, and with YELP your risk is all to the downside.

    So, update us, was this trade a loss, or a profit? What was your exit point, and reasons for the exit? Was it a Good, bad or average trade in your opinion? Would you use this strategy again ?

  10. Greg P Says:

    YELP is heading lower, and DWRE is heading higher. Stop visiting iBankCoin and letting those guys mess with your mind and getting you into shocking trades. Use your technical skills to trade with the fundamentals, not against them.

  11. Prospectus Says:

    I’ve been out of YELP for ages, but your point is noted.

  12. PJ (@ferodynamics) Says:

    Thanks for the Twitter follow. Funny, I was thinking about Yelp just yesterday, they got some bad press for offering to suppress bad reviews. It’s an icky business at the moment but with better management I think they are sitting on a goldmine–they just don’t realize it yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: