ChartWatch: LinkedIn Is Better Than Facebook

Today, the long anticipated Facebook (NASDAQ: FB) IPO is underway. As traders will no doubt love the stock, I will dutifully cover it over the next few weeks. And while Facebook’s IPO will receive the bulk of media attention, business networking cousin LinkedIn (Nasdaq: LNKD) could be more profitable over the next few months.

LinkedIn shares went public in May and they had a rocky start. The stock gyrated between $80 and $110 the week following its IPO, which is a large range to stomach.

The chart below shows that LNKD shares encountered severe selling pressure every time $110 was breached. And over the past year the stock has fallen to $60 twice.

The constant volatility over the past year is not uncommon among high-growth technology stocks when they initially trade on an exchange. The volatility occurs because long-term investors are unsure how to properly value the company, so direction of price is more influenced by momentum traders.

Over time, long-term investors figure out the company and build support zones for the stock. LinkedIn has two clear support zones at $60 and $95. The shares also display support at the 50-day moving average (orange line in the chart), which is currently at $102.05.

LinkedIn is back near the $110 zone of resistance and the recent bullish momentum has me thinking that it will finally break out and rally up near $150 over the next three months. While the IPO of Facebook might be more tempting for traders, I believe LNKD has more upside potential over the next three months. Traders must wait for a strong move past $113 before they enter any new position.