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ON BALANCE VOLUME


Yahoo! Gaps Off Support

09/26/07 12:29:09 PM
by Arthur Hill

Yahoo! had a rough summer, but the stock found support from last year's low and a gap-up kick started a breakout on good volume.

Security:   YHOO
Position:   Accumulate

Yahoo! (YHOO) has been on a roller-coaster ride the last 12 months (Figure 1). The stock advanced from 23 to 33 and back down to 23. The advance lasted four to five months and the decline lasted around five months. The stock hit support in late July and firmed in August. The broader market got hit in August as the Standard & Poor's 500 broke below its July low. In contrast, Yahoo! held support in August and did not move lower. This showed some relative strength and the stock is now bouncing off support. The bounce over the last three weeks reinforces support at 22.5.

FIGURE 1: YHOO, WEEKLY. The stock has been on a roller-coaster ride for the last 12 months, advancing from 23 to 33 and back down to 23.
Graphic provided by: MetaStock.
 
On the daily chart (Figure 2), the bounce off support looks strong and the stock broke a minor resistance level. The stock bottomed in early August and traded between 22 and 25 from August 1 to September 13. There was a nice gap higher on September 4 with high volume. Moreover, this gap held and the stock did not test support again. Instead, there was a small pullback and the stock broke consolidation resistance over the last four days. Turning bullish now is still a bottom-picking exercise, but the gap and breakout point to higher prices in the coming weeks. The first target would be the June high around 29–30.

FIGURE 2: YHOO, DAILY. The bounce off support looks strong and the stock broke a minor resistance level.
Graphic provided by: MetaStock.
 
The on-balance volume (OBV) is leading the stock. The OBV also stabilized in August and broke above its August high in early September (green dotted line). This breakout occurred about seven days before the breakout in the stock. The OBV continued higher over the last few days and this shows continued buying pressure. Strength in OBV validates the breakout in the stock.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

Title: Editor
Company: TDTrader.com
Address: Willem Geetsstraat 17
Mechelen, B2800
Phone # for sales: 3215345465
Website: www.tdtrader.com
E-mail address: arthurh@tdtrader.com

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