LinkedIn showed some impressive performance until September 2013, when it managed to climb close to the $260 mark. To be more precise, the social stock reached 257.50. However, the bulls were not persistent enough, which led to a massive sell-off. In May 2014 LinkedIn fell to as low as $136, where prices found support and began recovering. Now, one LinkedIn share will cost you around $238.
Unfortunately, these figures alone do not tell you anything about the most probable future direction of the stock. In order to make a reasonable investing or trading decision, we will once again apply the Elliott Wave Principle to a chart. For the purposes of objective analysis, we need a chart, which shows the whole period of time we were talking about in the first paragraph. This means weekly.
The Wave Principle states, that trends move in five-wave sequences, called impulse. Every impulse is followed by a correction in the opposite direction. As you can see, this is exactly what we have on the weekly chart of LinkedIn Corp. The rally to $258, labeled with I/A at the top, has a nice five-wave structure. Then came the disappointment of the wave II/B crash. Second waves often end in the zone of the 61.8% Fibonacci level to the previous impulse. LinkedIn seems to have provided us with the perfect example of this guideline.
The bottom of wave II/B marked the end of a classical 5-3 Elliott Wave cycle. According to the theory, the trend is expected to resume in the direction of the five-wave sequence. That is why Elliotticians were not surprised by the recovery that followed.
Details are important, when it comes to technical analysis. That is why we have labeled the wave structure of the recent rise, which also appears to be impulsive. This means we should expect a relatively small pull-back in wave (2), before the larger uptrend continues in the face of wave (3) of III/C. If this is the correct count, investors should not underestimate LinkedIn.
