Today, I am going to analyze the stock of Groupon, Inc. (NASDAQ:GRPN).
I am sure, like me, you've received emails from Groupon offering all kinds of special deals on meals, massages, auto detailing and so forth. It seems they come all the time and to be truthful, I have yet to take advantage of any of the deals Groupon offers.
I was curious and decided to look into the world of special offers from the other side of the table, so to speak. I checked with some of the merchants who are offering these deals or who have offered these deals in the past and asked if they would do it again. It seems that the experience, while novel at first, was not necessarily a positive one for all merchants. Many merchants found that people would respond to their offer, come once, and not return. So where is the upside if you're a merchant and you're selling at perhaps a breakeven price or loss? What's in it for them? Yes, you can chalk it up to advertising, but like any advertising if it doesn’t work for you, don’t go and do it again and again. I'm not sure if the Groupon model can continue if merchants begin looking at the numbers and deciding that this approach is not such a great deal anymore for them.
Let's take a look at the stock itself and see what it has been doing over the last couple of years. After dropping down to a low of around $3 in November of 2012, the stock moved steadily higher in a very optimistic and bullish climate in 2013. After hitting a high of just over $12.50 last September, the stock once again dropped below $9 before recovering to around $12 a share.
So what's ahead for Groupon, Inc.?
The key technical element to Groupon (NASDAQ:GRPN) in my mind is the long-term trend line that began with the low in November. Every time this stock has pulled back, the trend line has given it support. Should we see Groupon fall below $10, it would break the long term trend line and its pattern and set the stage for a test of the recent lows around $9. Should that level not hold and give way, it could send Groupon into a tailspin all the way down to the $6 level.
Put Groupon On Your Alert List
An easy way to follow Groupon is to put it in your portfolio and set up an email alert so that MarketClub can send you an email if Groupon moves below $10 and closes below its long term trend line. This would indicate that the probability of further weakness in this stock was very high.
This in-depth analysis of Groupon is not saying that this stock is going to fall apart, but rather I am reporting on one major technical element that could cause this stock to come under downside pressure.
What Does This Company Do?
Groupon, Inc. (NASDAQ:GRPN) operates as a local commerce marketplace that connects merchants to consumers by offering goods and services at a discount in North America and internationally. The company also offers deals on products for which it acts as the merchant of record. It offers deals in various categories, including food and drink, events and activities, beauty and spa, fitness, health, home and auto, shopping, and education.
Chart Legend & Technical Picture (Black Numbers)
1. 1st trend line point
2. 2nd trend line point
3. 3rd trend line point (potential pivot point)
4. Recent high (1st potential double top)
5. Test of recent high (2nd potential double top)
6. RSI below 50.
I hope you found this analysis of Groupon, Inc. (NASDAQ:GRPN) informative and helpful.
Have a great day everyone,
Adam Hewison
President, INO.com
Co-Creator, MarketClub
Adam,
excellent and simple presentation of a stock. You read charts with awesome credibility!
thank you, and thank you for helping me with CPSS.
sincerely
ricardo
I would be unsurprised to find in the coming months, that Groupon was found committing various improprieties. They've always been on the edge of viability not to mention clarity of their business goals and practices. They are shady group of manipulators and cajolers who only had a model that 'sounded' good, but never was.
Awesome post, Adam! Thank You!