LinkedIn Corp (NYSE:LNKD) with its market capitalization of $32.71B is a professional network on the Internet with approximately 300 million members in over 200 countries and territories. The company is one of the few social media stocks that have a potentially “tangible” service in the market and the company has impressive potential to reward investors and traders in the short to medium terms irrespective of the prevailing market direction.
My last coverage on LinkedIn was in August 2014 in a post titled “Connecting the Dots for Profits”. In that post, I talked about LinkedIn’s impressive top and bottom line results in Q2 2014, I mentioned its double-digit growth across reporting segments and I highlighted the company’s strong presence in Mobile.
I gave LinkedIn a $220 price target by January 2015 and the stock outperformed to record a $235.37 high on January 23. The bullish momentum has been very strong on LinkedIn Corp in the year-to-date period as the stock recorded a decent rally to record a $276.18 new 52-Week high on February 26. LinkedIn is displaying strong bullish tendencies in sharp contrast to the S&P 500. In today’s session, the stock has gained 1.28% to $265.18 as at 1:25PM EDT.
Upside Potential Ahead
The chart above shows how the shares of LinkedIn have traded within the last one year. You’ll observe that the stock has been obstinately northbound in the last one year as shown by the black arrow. In fact, the stock has soared by 34.91% in the last one year and it has gained 15.77% in the year-to-date period.
You’ll also notice that the stock has recorded three bullish breaks to new highs as shown by the blue arrows. An interesting point to know after the second and third blue arrows is that the stock usually observes a rectangle pattern that often serves as a launch pad to new highs.
For instance, the shares of LinkedIn experienced a rectangle (rectangle 1) with a $215 support and $235 resistance point in the first rectangle. That first rectangle then led then stock to breakout to establish a $260 high. That $260 high has now established another support for another rectangle (rectangle 2) for shares of LinkedIn. This new rectangle has a $260 support and a $275 resistance point; hence, we can expect a breakout towards $285 for LinkedIn.
How to Trade LNKD Options
The shares of LinkedIn will either breakout above $275 or breakdown below $260 probably towards a $240 trading price. However, the increased trading volume action on LinkedIn and the fact that the stock trades above its 50 and 200-day moving averages attests to the bullishness of the stock. I am also attracted to the RSI of 57.67, which suggests that the stock has room to soar.
I did notice that LNKD call options are mostly in the red; perhaps, investors and traders are worried that the good fortunes of the stock might not last longer. However, I am optimistic about the prospects of LinkedIn and thus, I recommend buying LNKD call options. I am especially attracted to the LNKD May 2015 300.000 call (LNKD150515C00300000). I recommend buying the contract because of its relatively low asking price of $3.20. Secondly, the contract has not been affected by the negativity surrounding LNKD options; in fact, the contract has gained 4.79% ($0.14) as at 2:21PM EDT today.
— Daily Option Alerts