Yahoo Expected To Make A Major Reversal
Alexandros Yfantis | Sep 27, 2016 08:36AM ET
According to Elliott Wave Theory, a 5 wave price action is followed by a three wave counter move against the previous trend. The most common retracement according to EWT and Fibonacci guidelines, is the 61.8% level. Yahoo! Inc (NASDAQ:YHOO) share price has started a 5 wave decline since late 2014 and concluded it when markets bottomed last February.
A clear 5 wave decline was complete. A three wave pull back was then needed as a counter trend rally. Price initially reached the 38% Fibonacci retracement of the decline and after a sideways consolidation phase (wave B) we saw and upside breakout labeled as wave C where the final upside would conclude. Price has already reached the 61.8% Fibonacci retracement.
In the shorter term, if we zoom in we can see a reversal pattern unfolding off the 43-44$ price level. The upside move from 37$ is most probably over and thus wave C. This implies a new trend will be starting soon if not already started with target new lows. Price has started making lower lows and lower highs on a daily basis. Price has broken the neckline support of a possible head and shoulder pattern and combined with the negative divergence by the oscillators we have several warning signals for bulls to be cautious.
The 39-40$ price level is important support area that if broken will confirm and validate my reversal signal. A break below the consolidation range of 37.50-34.50$ will increase the chances of success of my bearish scenario dramatically. So is YHOO heading for below 20$ I believe the risk is worth taking and as the decline will unfold, I will be adding to my short position.
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