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Yahoo! Inc. (NASDAQ:YHOO): May Face Sellers Near $44-$44.50

Posted by: : HEFFX Equities ResearchPosted on: October 28, 2014 Yahoo! Inc. (NASDAQ:YHOO): May Face Sellers Near $44-$44.50

Yahoo! Inc. (NASDAQ:YHOO): May Face Sellers Near $44-$44.50

Yahoo! Inc. (NASDAQ:YHOO) ended the week just 1% away from the year-high of $44, which is also the highest price registered by the stock in more than a decade. That clearly shows that no matter how the analysts rate the current CEO, Marissa Mayer, the market believes that the company is going to outperform by a good margin.

Investors must note that while the recent quarterly result has beaten the market consensus, it has not changed the actual state of the company’s balance sheet by that much but still the market has seen a 14% rally last week. The probable factors for the current upside may be the $38 billion stake Yahoo! Inc. (NASDAQ:YHOO) holds in Alibaba Group Holding Ltd (NYSE:BABA), or an expectation of value emerging out of the multiple strategic acquisitions in the mobile space.

Technically, the most important factor may be the testing of the long term secular supply zone in the $42-$44 area. Yahoo! Inc. (NASDAQ:YHOO) had reached the life high at $125 in early 2000, the IT boom pinnacle, followed by a vertical crash to $4 in less than 2 years. This kind of damage requires a lot of time to heal and the initial attempt to rally faced strong selling pressure at $42-$44 levels by 2005-06.

After nearly 8 years, the stock is testing this area of $42-$44 again and a successful break above $44 may push it higher towards the next major resistance in the area of $49-$50. But the weekly chart shows the price action of the last 1 year to be contained in a channel, with the upper boundary standing around $44.50 for this week.

A break above $44.00-50 will signal a channel breakout with the pattern implication giving a much higher target of $50, making a confluence zone with the long term target of $49-$50, and then a higher target of $54. Investors may buy this stock on any dip.

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