The Large Scale Rounded Reversal and Final Support for YHOO

Jul 21, 2010: 10:45 AM CST

Earnings from Yahoo (YHOO) disappointed investors this morning, sending shares down to the critical “Line in the Sand” support at the $14.00 per share level.

Let’s pull back the perspective on YHOO’s stock to note the large-scale “Rounded Reversal” or arc pattern along with the key level to watch on the Weekly chart:

First things first, the key price to watch is just under $14.00 per share, which represents numerous price lows as well as two price highs (early 2009) over the last year.

I call this pattern a “Support Shelf,” such that if sellers break the massive support line at $14.0 per share, it would be a game-changer in the stock to would likely send shares lower to test prior support levels, including the eventual potential for a return to the $10.00 per share level over time.

I posted Monday on a very similar support shelf in Bank of America (BAC) which ironically rests at $14.00 per share.

Beyond the $14.00 support level, investors (and traders) should be aware of the clear “Arc” formation which I like to call a “Rounded Reversal” pattern.

It began off the November 2008 price low and continues to “arc” over to this day – IF price completes this pattern, then it suggests for a return to the arc low from November.

BUT – as of this writing – shares remain at the key support level, so all is not quite gloom and doom from a price chart perspective.

Let’s actually zoom in on the daily structure to see the short-term support/resistance levels to watch:

Technically, the short-term multi-month trend of Yahoo’s stock remains in a sideways “flat” trading range between $17.50 as resistance and $14.00 as support.

If buyers are unable to overcome sellers here – literally right where we are now in price – then we could see a downside break from the range and beginning of a downside move, as hinted from the weekly chart (on a break of $14.00).

It’s not often when you can capture a stock literally on the precipice of Bull and Bear, but that’s where the general market is right now – so it is unsurprising that many stocks are showing similar “Make or Break” support levels… and an abyss underneath.

Speaking of Breakout Strategies, be sure to join me today after the close – 3:30 CST – as I conduct a webinar on Intraday Breakout Trading Tactics hosted by Mirus Futures/Trader Kingdom.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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