On April 30, 2015, in after-hours trading, LinkedIn (LNKD) declined –20.95% from the closing price of $252.13 to $199.30. with such a decline, it is worth considering what the downside risk would be according to Edson Gould’s Speed Resistance Lines (SRL).
The above chart shows the current SRL downside targets based on the peak price of $276.16:
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$187.68 (conservative target)
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$139.87 (midpoint target)
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$92.06 (extreme target)
What is most relevant in this SRL is the downside targets from the previous peak at $256.14. At that time, LNKD had the following downside targets:
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$181.00 (conservative target)
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$133.19 (midpoint target)
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$85.38 (extreme target)
In the prior decline, LNKD fell to slightly below the midpoint target at $133.19. This suggests that the current slump should go below the conservative downside target of $187.68. Going below the $187.68 level should get the stock price to the ascending midpoint target of $139.87. Those interested in LNKD should consider the stock in stages at or below the ascending $139 level with an acceptance of a decline to the ascending $92.06 level.
Worth noting is that anyone who had a standing stop loss order with their broker, say below $250 or $240, will be forced out of their position once the stock market opens on May 1, 2015 at whatever the opening price is as long as it is below either of the sample levels. At $199, investors with stop loss orders will take a severe beating even though they may not have been involved in the after hour activity.