is one of this year's best-performing stocks. It's risen 45%
while most stocks are up around 5% this year. The bullish
momentum is likely to continue for this outstanding company. But
at what price should investors look to enter its stock?
LNKD is in the midst of
one giant rally
that has taken the shares 65% higher since the middle of
November. More impressively (and possibly more annoyingly) is
that the stock has not given up too much ground during the
ascent. In fact, the shares rocketed from $120 to $165 without so
much as a 4% pullback.
Though a more substantial decline is long overdue, that's been
the case for many weeks. Instead, the shares have glided
So the best strategy here is patience. It's easy to say that the
shares should pull back, but they just haven't - not for many
months. Would-be buyers should not be in a rush to buy LNKD
either. Yes, this wait could result in missing out on another
move higher. Even if the shares pump to new highs, the likelihood
for a decline is high, making now a risky time to purchase.
However, there is hope for potential buyers. The stock has been
very responsive to the 50-day moving average (orange line). This
was something I noted in a
previous ChartWatch alert
At the time, I made the wrong call. It looked like the shares
were about to hit the 50-day moving average and turn lower.
However, the opposite happened, and a fresh buy signal was given.
Traders and I needed to reverse course because the 50-day moving
average has often been a precursor to a major move.
On several occasions (blue arrows), the 50-day moving average has
acted as a critical support or resistance zone that (in many
instances) resulted in a swift move. The same is also true when
the price crossed that trend line. Broadly speaking, LNKD has
increased when the shares broke above the 50-day and declined
swiftly when the stock fell below the 50-day.
More important than the reversals is how attracted LNKD is to
this trend line. The 50-day has been a virtual magnet. In fact,
the stock rarely moves substantially above or below the trend
line. Instead, it traverses near the trend line, moving in the
same direction - be it up, down or flat. Since LNKD is so far
above the 50-day, and because it's been three months since the
stock and trend line have touched, expect the shares to halt
their bullish advance. However, so long as the shares remain
above this trend line, use it as a support level and expect that
LNKD will move higher over time.
This chart shows the price of
shares along with an important trend line to monitor.
Equities mentioned in this article: LNKD
Positions held in companies mentioned above: