Five Star Stock Watch: Groupon

Groupon's stock had been flying high up until its peak in September of last year. After a rough selloff, the stock then tried to retake its high in January only to fall short at the same peak.

A disappointing earnings release sent the stock even lower in February, but now what? Judging from the reversal pattern on the stock, lower prices might be on the horizon. See why by reading the analysis below.

The company: Groupon, Inc.

Ticker Symbol: GRPN

Sector: Technology   

Industry: Internet Information Providers

Groupon, Inc. 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. 

Related: Five Star Stock Watch: Rite Aid

The company emails its subscribers discounted offers on goods, services and travel targeted by location, purchase history and personal preferences. It also enables its customers to access its deals directly through its website and mobile applications. 

Please take a look at the one-year chart of Groupon below with added notations:

As mentioned above, Groupon peaked in the same $12.50 area in both September and January. For readers unfamiliar with the pattern highlighted above, it is what's known as a double top. 

Double tops are reversal patterns that, once confirmed by a break of support, commonly signal lower prices for the underlying security.

Related: Five Star Stock Watch: Blackberry Limited

Groupon's earnings release caused the stock to confirm the double top pattern and thus it should most likely be hitting lower lows in the future.

Groupon isn't set to release earnings again until May 2014.

No matter what your strategy, or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!