By the end of the week Alibaba (NYSE:BABA) will be trading on its own. I doubt that there's anyone on the planet who doesn't know that Yahoo! (NASDAQ:YHOO) has a very large stake in Alibaba, some of which it will certainly sell. But there are a lot of opinions as to Yahoo!'s actual value. The prevailing view seems to be that it is inflated thanks to the IPO but that once the dust settles, Yahoo! is a broken company to be sold. Yet a look at Yahoo!'s stock-price chart indicates that perhaps you should ignore the noise and take another view. In fact, that chart is screaming for another look.
Indeed, the above monthly chart says a lot. First, the stock has been in a tightening range since 2002 with resistance at 40.80. Second, there is further resistance at 45 above that from 1999. Third, the stock price is moving into that range, over 40 and below 45, for the first time since 2000. Next, the stock has been under accumulation since 2012 and it is picking up. The RSI is bullish and rising, supporting further upside in the price action. Finally, the yellow box shows there is very little cumulative prior experience (volume) above $45.
Clear Bias
Those are the facts. So what do you do with them? Despite the noise of overvaluation, this stock shows a clear bias to the upside. Should that last candlestick hold up through the end of the month it will be hard to make a case not to be long this stock. The IPO will be over. There is a natural stop at 40.80 and possible massive upside through the 45 level. Even if you don't like the 15-year view, the shorter 24-month picture still reveals a move higher and consolidation before a return higher targeting 60 on a Measured Move higher.
So sit back and watch the IPO. There's time. But, if this stock holds over 40.80 post IPO, write it off as noise at your own peril.