Recent price momentum in Yahoo Inc. (NASDAQ:YHOO) has been favorable to
those holding long positions in the stock. The upside price action has pushed
YHOO to downtrend line
resistance. Being that this resistance
level has only been tested successfully on one previous occasion, the
validity is still uncertain. That's why I began looking for secondary indications that YHOO may pull
back due to downtrend line resistance.
Let me explain what can be seen on the chart above. The potential level of
resistance is strengthened by 3 bearish secondary indications.
- YHOO is trading just above the upper Bollinger Band. The upper band acts as an
area of resistance for stocks, and a breach of the upper band indicates
the stock is due for a pullback.
- YHOO is trading at its 50 day Moving Average. Although moving averages
are not extremely strong indications of resistance, they do strengthen a
technical resistance level when trading at or near the primary resistance
level (in this case, the primary resistance level is the downtrend line).
- RSI is trading at levels which indicate the stock is
over bought and due for some selling pressure.
I feel YHOO is worth shorting at these price levels.
Happy Trading,
Andy Swan
co-founder, DaytradeTeam
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