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04/28/14 12:06:19 PM
by Koos van der Merwe

Yahoo saw its share price rise by more than 7% on the morning of April 16, 2014.

Security:   YHOO
Position:   Accumulate

On April 16, 2014 the share price of Yahoo (YHOO) soared after better than expected earnings. Yahoo CEO Marissa Mayer's strategy to re-emphasize native video and its mobile and social platforms is liked by Jim Cramer. He also likes that YHOO owns a large stake in Alibaba, a Chinese retailer whose revenue grew by 66% in the last quarter of 2013. Alibaba is expected to go public later this year.

Figure 1. Weekly chart of Yahoo with an Elliott wave count.
Graphic provided by: AdvancedGET.
The weekly chart of YHOO in Figure 1 shows the Elliott wave count, which suggests that the share price could be moving into a WAVE V with a target of $43.59. With the current price at $36.25, the percentage profit would be 20.25. The RSI indicator is confirming the buy signal.

Figure 2. Daily chart of Yahoo showing a gap.
Graphic provided by: AdvancedGET.
The chart in Figure 2 is a daily chart with an Elliott wave count and a JM Internal Band indicator. The Elliott wave count confirms the count shown in the weekly chart of Figure 1, suggesting that the price should rise in a WAVE V. However, the chart does show a gap at the $35.57 level, and the price should fall to fill that gap. It could fall as low as $34.40. The JM Internal band indicator, a 15-period simple moving average offset by 2% positive and 2% negative gave a buy signal on April 16, 2014 as shown on the chart, when the share price broke above the upper band. A buy signal is given when the price breaks above the upper band and a sell signal is given when the price falls below the lower band. The jump in price on a gap to give the buy signal, is disturbing because of the expected price fall to fill the gap. However, the RSI indicator which gave a buy signal and is trending upward, is a positive move.

I would wait for the price to drop to fill the gap somewhere between $34.50 and $35.57 before placing a buy order. Should the share price not fall to fill the gap, and rise above $37.27, the high of April 16, 2014 I would be a buyer.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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