Assessing 2011's Biggest Tech IPOs

How are 2011's most anticipated initial public offerings (IPOs) performing in this 2012 bull market? Did last year's media hype on LinkedIn (LNKD), Pandora (P) and other hot properties translate into solid uptrends? Or did self-serving underwriters goose up offering prices well above reasonable value to line their own pockets and create an oversupply of retail bagholders?

Here's a useful trading tip before we look last year's biggest tech IPOs: The opening price on the first trading day instantly becomes a major support and resistance level that can come into play months or years later. Draw a horizontal line across that number when organizing your watch lists because crosses above the line after a long decline often signal the start of a new uptrend.

LinkedIn (LNKD)

Source: eSignal

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LinkedIn came public at $83 (see the blue line on the chart) on May 19 and traded in a 43-point intraday range. The stock hasn't approached that session's high of $123 in the last 10 months. A downside range break triggered a swift decline to $60 in June. The stock tested that level in November and shot higher, but it is struggling with the resistance that was created in the first session.

The stock closed the first day near $95 (see the red line on the chart), with that level also setting up as resistance. Rally attempts have stalled six times in the last seven months near that pivot, with the price now sitting just 4 points from the opening print. The persistence of that barrier sets up a buy signal on a breakout because the next upswing should reach $110 as a minimum target.

Groupon (GRPN)

Source: eSignal

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Groupon (GRPN) joined the stock club at $28 on Nov. 4, popped up to $31 in that volatile session and sold off, closing near $26. The high and opening print posted that day haven't been challenged in the last four months. The price action during this period shows well defined resistance above $25, with three failures to mount that level, which aligns with the first day's low (see the red line on the chart).

Unfortunately, things are now getting worse because the stock gave up most of its January bounce after reporting weak earnings on Feb. 9. It held a tight range above $18.90 for three weeks and broke down on Monday. This failure sets up a short-sale opportunity on a pullback into that level, if you can find available shares. The downside target lies near the post-IPO low at $14.85.

Zynga (ZNGA)

Source: eSignal

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Zynga (ZNGA) came public late in 2011, opening at $11 on Dec. 16. The stock carved out an intraday range between $9 and $11.50, closing near the low. The shares then sold off for three weeks, hitting bottom on Jan. 9 and turning higher. It hasn't looked back since that time, first piercing the IPO closing print on Jan. 24 and then clearing the opening print a week later.

The stock topped out at $14.44 and entered a trading range that's still in play five weeks later. A recent breakout attempt failed but strong accumulation and a stronger price pattern predict the uptrend will find its way to higher prices in the second quarter. For now, I would be a buyer if it crosses back above resistance at $14.60, or if the selloff continues and drops to February support at $11.70.

Pandora (P)

Source: eSignal

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Pandora hit the public exchanges at $20 on June 15, spiked up to $26 immediately and then reversed sharply. It found support at $12.16 on the third trading day and spent the next two months grinding sideways within the big range. The stock then drifted lower through the third and fourth quarters, pounding out longer-term support near $9.25.

A January bounce off the lows stalled above 14.50, with the price pulling back to the 50-day EMA and testing the high on Monday. Unfortunately, the company missed fourth-quarter revenues and lowered guidance in Tuesday's earnings report and is set to open near the red line at $11. This looks like a classic setup that will eventually break the 2011 low and trigger a major sell signal.

At the time of publication, Farley held no positions in the stocks mentioned.