Yahoo shares could be in for a long-term downtrend, as price is completing a head and shoulders pattern on its weekly chart. Price is currently testing the neckline and might be due for a downside break soon.
However, the 100 SMA is above the 200 SMA so a bounce might still be possible. Stochastic is indicating oversold conditions so sellers might be feeling exhausted for now, allowing buyers to take over for a while.
RSI is on the move down, which suggests the potential for further declines. This oscillator is also nearing the oversold area, though. A downward crossover from the moving averages could confirm the potential breakdown and likely selloff.
Latest news from the company reveals that Yahoo turned Tumblr into a standalone company, which means that its operations will be managed by a different set of officers. Last month, Yahoo CEO Mayer admitted that Tumblr didn’t bring as much revenue as expected, forcing the company to post a $230 million devaluation.
“In 2015, we experienced a slower ramp in monetization than we initially expected, and coupled with the sales realignment, the business didn’t deliver that $100 million revenue goal for the year,” Ms. Mayer said during Yahoo’s latest earnings report.
For some analysts, the merger was simply too rushed, as both companies didn’t iron out their marketing and monetization plans from the get-go. A strong break below the $27/share area could set off a prolonged drop until the next visible support around $12/share.
On the other hand, a bounce could lead to a pullback to the near-term resistance around $28-30/share, with a break past the right shoulder likely to indicate that a bit of consolidation might be seen.
US traders will return to their desks today following yesterday’s President’s Day holiday so stronger stock market moves might be seen.
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