The headline says it all.  Shares of Yelp Inc (YELP) may be on the verge of a technical breakout from a bullish triangle formation.  More on that in a bit.  First let me be clear that from a fundamentals and business model standpoint I flat out don’t like Yelp in the least bit.  For one, I like companies that aren’t burning through cash.  Yelp continues to grow and as they grow, the losses pile up.  When that trend changes is anyone’s guess, but I would not bet that it’s anytime soon.

====> Get Your Daily YELP Trend Analysis Here

I don’t claim to be an expert on Yelp, but as a marketing director for a growing ecommerce business I’ve had experience with it in the form of customer reviews.  The problem with Yelp is their automated filter which tends to remove reviews from users who don’t have a history of reviews even if they are 100% legit.  It’s something that happens often and it’s pissed off a lot of small business owners.  We actually make it a point to our customers that if they would like to review us they don’t do so on Yelp, but at Google.  I’d imagine other companies are figuring this out and doing the same.

From a competition standpoint, I believe Yelp will continue to lose market share to Google in the business review market and to Google and many other companies in the Daily Deal market.  Yelp does generate revenue from paid listings as well, but  we weren’t impressed with the pricing they offered and didn’t stick with it.  All in all, due to competition and poor business decisions, I don’t believe Yelp survives in the long run.  Since Yelp declined Google’s offer of $500 million a couple years ago, Google has been aggressive in the review market with a purchase of Zagat.  That will continue.  Perhaps Yelp become the MySpace and Friendster of the review industry.. we will see.

With all that said, I do believe that shares of YELP are setting up to potentially offer a great trade (not a long term hold)!  After surging on the day of the IPO, the stock gave much of it back and in recent weeks has been carving out a bullish triangle formation with the daily price fluctuation getting squeezed to a point.  Soon, something has to give and the odds indicate that move will be up.  Should YELP break out of the formation as highlighted below, I believe the stock could run and offer a nice swing trade.

====> Get Your Daily YELP Trend Analysis Here

Disclaimer:  I have no position in YELP.

UPDATE (3:07PM EST): Just as I published this piece YELP signaled an entry point with a break from this bullish pattern.

UPDATE (4:13 PM EST): A failed intraday breakout attempt puts YELP back into the base with no breakout confirmation on the daily chart.  Tomorrow’s trading should be interesting.