Yahoo! Inc. (NASDAQ:YHOO) was expected to gain hugely post the listing of the much-hyped Alibaba Group (NYSE:BABA). It did list with a 36 percent premium on the issue price but Yahoo! found itself in the midst of a strong downtrend and showed no signs of reversal in the near term. The company did reap a total of $9 billion from its stake in Alibaba and had assured the Street that most of the post-tax gains would be given back to investors through share buybacks.
But most investors aren’t waiting for that to happen as they can now directly buy into Alibaba. Many analysts also believe that Yahoo! would not be able to regain advertising revenue that it has lost to competitors like Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB), which is seen as a huge long-term negative for the company.
On Yahoo!'s daily charts, the company has been in a strong downtrend over the last few down days by close to 10 percent on the back of above-average volume, which is a bearish indicator. Many traders believe the next support for the stock would come at around $37.56, which is also the 50-day moving average for the stock. The momentum indicators for the stock have given a fresh sell signal confirming the shift of momentum to the sell side. The relative strength index for Yahoo! has given a sell signal indicative of the overall bearishness on the stock.
Actionable Insight
- Short Yahoo! at current levels for targets of $37 in the very near term.
- Long Yahoo! only if it closes above $39.84 for an intermediate target at $41.80 in the near term.
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