Yahoo! Is Poised for a Breakout

If Yahoo! bulls can drive the stock past the April peak, a big rally could be on the way.
By Gary Morrow ,

 Shares of Yahoo! (YHOO) are on the verge of an upside breakout. The stock's impressive rebound off of the Monday lows lifted the stock all the way back up to a very key level. If Yahoo! bulls can drive the stock past the April peak, a big rally could be on the way.

Yahoo! has been stuck in a very narrow consolidation pattern since the beginning of April. The stock had surged over 40% from its February low before peaking near $37 just six weeks later. Yahoo! was in need of a healthy consolidation, and with the stock well into overbought territory, that's exactly what has played out over the last 10 weeks. During this phase the $37-to-$38 area has continued to provide a wall of resistance while the area of the October/November highs has provided solid support. Once this constructive action resolves to the upside, a big move is a distinct possibility. Yahoo! has a long ways to go before it returns to overbought territory.

In the near term, patient Yahoo! bulls should consider the stock a very low-risk buy between $37.80 and $36.50. If a bit more back-and-fill trade is needed before the $38 area, which marks the April and May highs, is clearly taken out, this zone should provide strong footing. On the upside, once new 2016 highs are reached, the stock will have plenty of room to run.

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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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