So much for LinkedIn's
(LNKD) status as investors' favorite social media stock -- it has been looking toxic since back in September. You don't need to be an expert to figure out what's going on in LinkedIn's chart -- the setup in this stock is about as simple as it gets. LNKD has been bouncing lower in a well-defined channel for the last six months or so without an end in sight.
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Now, as LNKD pushes up to test resistance for a sixth time in the downtrend, it's time to think about selling a bounce off of the top of the channel. Waiting to sell off a resistance bounce makes sense for two big reasons: it's the spot where prices are the highest within the channel, and alternatively it's the spot where you'll get the first indication that the downtrend is ending. Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring that sellers are still in control before you unload your stake in LNKD.
Luckily for value investors, the sky-high valuation on LinkedIn right now should prevent too many bargain-hunters from snapping up shares just before they make another leg lower. The real danger, though, comes for anyone who's holding onto shares and waiting for a rebound. It makes more sense to sell the resistance bounce here.
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