YHOO shares could be due for a bounce after its sharp selloff, as the stock is testing a key support area visible on its 4-hour time frame. At the same time, stochastic is indicating oversold conditions, which means that buying pressure could return soon.
If support at the $42/share level continues to hold, YHOO shares could recover back to the range resistance at $44-45/share. Further gains past this point could lead to a climb up to $47-50/share. However, the moving averages are suggesting that further losses are more likely to be seen.
YHOO Shares Forecast
The short-term exponential moving average is treading below the longer-term EMA, indicating that the downtrend is set to carry on. This could lead to a break below the range support at $42/share and a potential move to the next floor around $40/share.
Just recently, YHOO shares received a downgrade from analysts due to core business concerns. Recall that the company was unable to meet expectations for its Q1 2015 earnings report, indicating that its performance has been subpar during the start of the year.
According to Tigress Financial analyst Ivan Feinseth who moved the stock rating from ‘Buy’ to ‘Neutral’, while Yahoo’s combined mobile, video, social and native ad unit posted a 58% increase in Q1 sales to $363 million, it represented only 30% of overall revenue. He added that the company’s operating margins have narrowed significantly.
The company reported adjusted EPS of $0.15/share, down 61% on a year-over-year basis. Non-GAAP revenue also fell 4% to $1.04 billion, short of forecasts calling for revenues of $1.05 billion. The upcoming US non-farm payrolls report should provide an additional market catalyst for more volatility later on, as strong data could still usher in renewed demand for US equities, including YHOO shares. On the other hand, weak jobs data could cast doubts on the economic recovery and lead to more stock downside.
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