YHOO Stock: A Breakout Is Imminent
Yahoo! Inc. (NASDAQ:YHOO) stock is setting up to make a bullish move, and I have been waiting for Yahoo stock to complete a price pattern that will indicate when the next run is set to take place.
This is the same pattern that I highlighted in my previous publication regarding Yahoo stock, on November 29, 2016. Over a month has passed and Yahoo stock continues to trade within the confines of this pattern. I am beginning to lose patience, so this probably means that a resolution to this pattern is only moments away.
For those not familiar with my work, I use technical analysis to analyze potential investments and create investment strategies. Technical analysis uses past volume and price data to discern trends and forecast future prices. The method of analysis is timely and has been instrumental in quantifying my level of risk.
The following Yahoo stock chart illustrates the pattern that I continue to watch.
Chart courtesy of StockCharts.com
The YHOO stock chart above is a perfect example of a healthy bullish trend.
The bullish trend began in early February when YHOO stock surged off of the lows in a swift and linear motion. This surge in price is highlighted in green in the above chart, and is what traders refer to as an impulse wave. The sideways trading action that followed, highlighted in purple, is what traders refer to as a consolidation wave.
Directional trends are littered with this type of price action, and both types of waves are dependent on each other. Impulse waves take a price to new heights and consolidation waves serve to alleviate any overbought conditions and set up the next advancing impulse wave. This cycle can continue for prolonged periods as long as the trend remains orderly.
Shortly after this bullish trend began, a golden cross was generated in mid-April. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. This signal acts to confirm that a bull market is now in progress. It is not uncommon for a price to accelerate after such a signal is given, as many traders give a lot of credence to it.
Yahoo stock did not accelerate in price right after this signal because it was still in the process of completing a consolidation wave. In mid-July, the price exited the consolidation wave, marking it complete, and the acceleration in price began as an impulse wave took YHOO stock on a run just shy of $45.00.
After this high was created, a consolidation wave followed, which is serving to alleviate any overbought conditions and potentially set up the next bullish move.
The current consolidation wave is different than the consolidation wave that came before it. This wave is downward-sloping so, as time progresses, the price continues to drop. YHOO stock has now retraced the entire previous impulse wave and has returned to test the the resistance level that contained the price inside the previous consolidation wave.
If a bull market in YHOO stock is going to continue, it is imperative that Yahoo stock does not fall below this level. The price needs to exit the current consolidation wave in short order, to preserve the bullish price action that has dominated the landscape.
In order to preserve the bullish landscape, Yahoo will not only need to exit the channel, but there is also the 50-day moving average that has refuted any price advances.
Luckily both levels currently coincide around one price, so a break above both levels would probably involve some fireworks and would also indicate that another impulse wave is finally in development.
Bottom Line on YHOO Stock
I continue to wait for the completion of a particular pattern on the Yahoo stock chart. In order for the landscape to remain bullish, YHOO stock must resolve this pattern with a bullish breakout. This breakout must occur soon, as time is running out.