Yahoo! Is Worth Watching

Shares of Yahoo! (YHOO) have been trading in a converging sideways range for more than three years now on investor uncertainty about the company’s future.


As can be seen in the decade-long monthly chart above, YHOO is trading in a multi-year Symmetrical Triangle that will ultimately take YHOO to a very low single-digit level or back to about $30 and this big break should come within a year.

Based on its bottoming aspect highlighted by the dashed trendline, it is my inclination to think that this pattern will be resolved to the upside for a near double with it also seeming likely that the Symmetrical Triangle’s next sideways move is up as the Diamond Bottom attempts to confirm at $18.84 for a target of $26.60 or so.

Might YHOO take another sideways swipe down to the bottom of the Symmetrical Triangle, though, around $13? It very well may, but this should be taken seriously only if YHOO closes below $14.35 while the Double Bottom right side of the Diamond Bottom supports the idea that YHOO has been putting in a sideways bottom over the last year to complement its possible bottoming born of late 2008.

Put otherwise, it seems more likely that YHOO holds this year’s sideways range between $14.35 and $16.35 and that such a potential holding of support will push YHOO up toward $20 in the weeks and months ahead and an event that would support a move toward $30. However, if YHOO closes below $14.35 and then, far more importantly, $11.09, it will become much more likely that YHOO will drop down below $10 if not below $5.

At stake fundamentally is whether or not management – with uncertainty around who management is exactly – can successfully transition YHOO to a media-oriented company and away from a traditional internet search provider in a way that grows shrinking revenues while continuing to grow net income that has exploded higher since 2008.

If not, YHOO will drop down into possibly permanent oblivion, but if so, YHOO will very likely take on levels not seen since the middle of the last decade and perhaps become an attractive takeover candidate as well.

Overall, then, YHOO is worth watching and particularly for some bullish upside.