Yelp Inc: YELP Stock is Standing Tall Despite the Turmoil

YelpYELP Stock: Standing Tall

2016 is the year that Yelp Inc (NYSE:YELP) stock turned the corner as multiple indicators suggested that a bull market was on the horizon. YELP stock has had an unbelievable run off of its lows set this year. A 154% return would have graced my portfolio if I had been fortunate enough to pick up shares at the lows.  If only I had a time machine in order to go back and pick up some shares on the cheap.

Perhaps I do not need a time machine, because September is known as the worst-performing month of the year. The markets have started September on a rocky path, as volatility in the indices is the major theme. Perhaps a sell-off in the markets will be enough of a catalyst to discount the price of YELP stock.

The following chart illustrates the market development that has set off the selling in equities.


Chart courtesy of

The chart above illustrates that interest rates have risen in the month of September. The change in yield might seem minuscule at 0.227 basis points, but that equates to an increase in yields of 10%, and that is a considerable sum.

What makes this chart even more worrisome is the pattern that has developed. An impulse wave (highlighted in green) is followed by a consolidation wave (highlighted in purple), which gives way to another impulse leg. This may be a short-term phenomenon, but until yields fall below 2.2% (22 on the chart above), the new trend is toward higher yields.

The markets are not happy with higher yields. Higher yields lead to higher interest rates and this has caused market turmoil in the past. Much of today’s economy is run on low interest rates that act to fuel increasing amounts of debt. If this trend of higher rates is set to continue, it will most likely cause further selling in the markets.

The following chart illustrates the major trend that has supported YELP stock.


Chart courtesy of

The uptrend line (highlighted in blue) has acted as support, and has done an incredible job of rejecting any attempts to fall below this line. A break of this line would signal a trend reversal. Perhaps the weakness in the markets will act as a catalyst that will finally break this line of support.

It is my belief that YELP stock has only begun its move toward higher prices and, because of this premise, I would welcome a break of the trend in hopes of acquiring shares as they pull back. For this reason, I have attached the following chart to illustrate possible levels of support.


Chart courtesy of

The horizontal level of support marks the price point at which YELP stock confirmed a bottom in share price, as the trend was finally able to make a higher high. This level also marks the level where YELP stock left a price gap. If this gap is indeed a breakaway gap, then these gaps are known to rarely get filled and almost always signal that a new trend has started. It is worthy to note that the placement of the gap is picture-perfect.

A break below the uptrend line would put the horizontal line as the first objective on the downside. Other levels of support are dynamic, as are the 50- and 200-day moving averages. As long as YELP stock is trading above the 200-day moving average, my bias will remain bullish. The 200-day moving average is the dividing line between stocks trading in a bull market and stocks trading in a bear market. When the share price is above the moving average, it is bullish; when the share price is below the moving average, it is bearish.

The Bottom Line on YELP Stock

YELP stock has resisted the current decline in the indices by remaining above the uptrend line.  The seasonality patterns surrounding this time of year open the door for share price weakness. If the weakness persists and a sell-off develops in the price of YELP stock, I would interpret the weakness as a price discount. My current bias is bullish, and is based on technical signals. My bias will remain until the charts give me reasons to the contrary.