$GRPN Shoots Up 23% on Huge Volume, Lots of Speculation (Chart)

$GRPN rose 23% on Friday on no news. The action started before 11:00am (I randomly tweeted the move I saw), and then it kept spiking on huge volume after 2:00pm.

source: StockCharts.com (GRPN 1-day, 2-minute chart)

My sources say it could be related to short covering, hedge funds buying the stock (Tiger Global Management LLC owned 9.9% as of 11/19/2012), or speculation that it could be a takeout candidate (Google bid $6 billion for Groupon in 2010, so it is now half off). It could also be related to simple price valuation ratios. When $GRPN crashed to a record low of $2.76 on November 11 after missing Q3 earnings estimates, I mentioned that Groupon was almost trading at its cash and book value. Since then it rallied 70% to $4.68, so it was obviously severely oversold at that point. Check out the chart below. It's been building a bullish divergence for a while now.

source: stockcharts.com
1. The MACD (moving average convergence divergence) pierced through zero again (the "signal line") after failing in October (read more about the MACD signal at StockCharts.com). The last time $GRPN was above zero was right after its IPO. MACD has been diverging with price action since April 2012.

2. RSI looks decent above the mid-line (50). It could finally head back up to overbought territory at some point, which was last seen in February 2012.

3. $GRPN broke through the 50DMA today on strong volume and is testing the ultimate downtrend line. $3.78-$6.35 (late July resistance) could be a sideways trading range in the near-term, whether it breaks the trend or not.

So now the question is whether a technical breakout will confirm a turnaround in the company's revenue and gross billings. Or maybe they will buyback stock with all that cash. Groupon not opposed to share buybacks: CFO (Crain's Chicago Business, 11/14/2012):

"With Groupon Inc.'s stock continuing to plummet, chief financial officer Jason Child says the company would consider a share buyback."