Earlier this year, we featured Groupon, Inc. (NASDAQ: GRPN), the famous cost-cutting, bargain-hunting website that allows shoppers a chance to save money on consumer goods and services online.
Back then (in late June), GRPN got caught in a serious case of sideways chop. The stock refused to go anywhere, bouncing around the same price level for months.
And, in an attempt to take advantage of an impending breakout, we set trade triggers above the 3-month highs and lows.
Sure enough, six weeks later, GRPN plummeted, dropping over 28% from our short-sided trigger point.
Now, almost five months later, it could very well happen again. But instead of a tight corridor of “choppiness,” we have – you guessed it – a triangle formation.
One that could prove to be the beginnings of a great trade.
In the daily candlestick chart above, you can clearly see the triangle that’s formed since September, along with the plunge GRPN went on in August.
You can also make out the strong level of resistance that exists at $3.05 – a price point GRPN simply can’t move past. It’s bounced off resistance twice, almost a third time three days ago, and continues to ride that lower trendline, setting higher lows.
But without higher highs, all GRPN’s doing is working itself into the triangle’s corner. Which, for long-term investors, is frustrating.
For us, though, it’s a huge opportunity to snag yet another handful of GRPN breakout gains.
Odds are that with the existence of so many higher lows, alongside a refusal to stay below the 50-day moving average, GRPN will eventually break out upwards. Plenty of bulls are eyeing that resistance line we’ve drawn in the chart, and if GRPN keeps rising, they’ll have cause to enter a long position right above $3.05 with a trade trigger at $3.10.
However, if GRPN runs out of steam at resistance again, all bets could be off once it crosses the lower trendline by a significant amount. At that point, it might make sense to go bearish and set a trade trigger at $2.75.
Either way, GRPN looks like it’s primed for a breakout. It really doesn’t matter which way it goes, either.
Just so long as you – a nimble, short-term trader – are ready when it moves past one of the two psychological price barriers.
