Yahoo! Inc. (NASDAQ:YHOO) – May test $38-$40 levels

Yahoo! Inc. (NASDAQ:YHOO) had a positive session yesterday with a gain of 1.5% but that didn’t really anything to the structure of the stock. In the last few weeks, the stock has been stuck in a narrow range of $42-$45 and that can be only be taken as a bearish consolidation, keeping the short term downtrend in mind. The thin volume, 11 million against the average volume of 13 million, supports the speculation of the bears just taking a pause.

Why are analyst so optimistic about YHOO?

The recent weeks have been mixed for Yahoo! Inc. (NASDAQ:YHOO). The company has gained a 2% share in the “Search” market after Mozilla decided to tie-up with a 5-year deal, instead of renewing its prior deal with Google Inc (NASDAQ:GOOGL) and that has already resulted in Google’s share dropping below 75% for the first time since 2008. Still, one must consider that the benefit for Yahoo is going to be limited as only 12% Americans use Firefox, Mozilla’s browser.

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On the other hand, the bidding war for the exclusive streaming rights of the very successful show “Seinfeld” may be reaching the stratospheric sphere, as Yahoo! Inc. (NASDAQ:YHOO), along with other companies, take it to $90 million. This kind of pricing may not be taken kindly by the market, especially for a company, which keeps seeing its display advertising revenue slipping up.

Technically, the short term downtrend looks yet to be exhausted and may reach $40 levels soon, a major support as the long term trendline there is clearly visible from the chart. While that would keep the bulls happy for now, what should make them anxious is the decade long channel containing all the price action of the stock. Hitting the upper boundary last November, 2014 forced the stock down and as long as that line is not broken above, the stock may spend the rest of the year in this channel.

About the Author

Terrel is US Markets Daily's business news reporter. She joined US Markets Daily after five years as a print reporter.

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