Yahoo A little Too Frothy Near-Term But Solid Longer-Term

Global internet media company Yahoo! Inc. (YHOO) has made the news more frequently than Lindsay Lohan over the past couple of years.  From restructurings to corporate raider attacks, a new CEO, and most recently an expansion in New York City, including the acquisition of Tumblr for $1.10 billion, it’s been enough to make even the most astute trader ask for a pause.

If we consider the below multi-year chart that spans back to 2006, the stock’s strong rally since September 2012 has certainly brought some life back into a stock that couldn’t get out of its own way in recent years.  Even so, Yahoo! Inc. (YHOO) has so far ‘only’ retraced roughly 50% of the slide from the early 2006 highs down to the late 2008 lows.  Given the long basing period from 2008 through most of 2012, the stock should from this longer-term perspective now be in a position to work nicely higher still over coming years.

yhoo multi year

More near-term, Yahoo! Inc. (YHOO) is still higher by almost 33% year to date, in a move that while orderly (i.e. with a series of consolidation periods and subsequent rallies) most likely is also too steep to sustain at this rate.  After a series of sideways chop and indecision candles over the past two weeks of trading, the stock this morning gapped down below lateral mini support near $26.50 and now looks to have room down to its 50 day simple moving average (yellow line) currently around $24.50.

Alert traders would have noted as a first sign of caution that the stock lost upside momentum in recent trading days, indicated by the negative divergence that the Stochatics momentum oscillator.  This, coupled with today’s drop below initial support should let the stock fall a little longer before better support near $24.50.

yhoo daily chart



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