LinkedIn Could Drop 59% to $50 If the Bears Have Their Way
Earnings or not, beating estimates or not, the share price of LinkedIn (LNKD) has peaked, and the February low near 100 is soon to be broken. Actually, broken is a misleading word, as the minimum target for the slide that began last week at the $130 level is $85-to-$95. However, another worthy target of the bear's coming disdain is the $50-to-$70 zone.
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One reason our decision support engine just flashed a red alert sell signal is the bearish divergence sell signal highlighted by the bold, blue lines at the lower right of the price pane and upper right of the stochastics pane. This shows higher highs (recently) in price vs. lower highs in stochastics, which is a harbinger of weakness to come. That is happening since the earnings announcement last week, when the company beat expectations, without any situational awareness of the bigger picture.
That day, Friday April 29th, the DSE warned members of our live-market Trading Room and DSE Alerts services that the eight-point rise was an ending gasp of the corrective bounce off $100. Further, that the test of $130 should be used to exit longs, especially if leveraged, and prepare for a break of $100.
Another reason is the is the free fall condition of the stochastics themselves, where the red line is falling away from the green line, which puts heavy price drag on pricing of the shares. Note also that the yellow box of price behavior just completing mimics the height of the yellow box of price behavior at higher price levels, both corrective in structure.
Once the corrections end, the trend at larger degree usually continues. In this case, the slide from $260 to its eventual conclusion, at least temporarily, to either the $90 zone, or the $60 zone. These two levels, represented by the light green ovals in the bright green box, are where historic symmetry will be witnessed between the internal waves of the larger declining wave, and satisfy the dynamics of Elliott Wave and Fibonacci theories of predictive price behavior.
If you are long, especially if leveraged, $120 should be used to exit, before 25% to 50% is wiped out of your LinkedIn valuation. If flat, short exposure can be established here, too. Timing is not part of the DSE's algorithms, but we can sometimes estimate intra-trend durations using other tools. For instance, the $90s should be seen between Memorial Day and July 4, while the $60s could take until Labor Day to manifest.
Feel free to contact us at support@dsetrading.com to keep informed about this play.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
