Yahoo YHOO Building Toward a Triangle Breakout

If you’re trading Yahoo! (YHOO), you may have a breakout trading opportunity shaping up as price consolidates into a visual triangle ahead of a likely breakout.

Let’s study the pattern, note the breakout levels, and highlight possible targets on a successful breakout impulse play.

A Triangle Trading Pattern (education link) occurs when price consolidates into equilibrium between buyers and sellers as price trendlines narrow to a “Midpoint.”

I highlighted the current daily chart Triangle on Yahoo’s chart above.

Pay close attention to the rising support of the 200 day Simple Moving Average (SMA) currently into the $43.50 per share area and the falling price-based trendline (and prior price high) near $46.00 per share.

The expectation is that price will shift into a breakout mode beyond one of these levels, generating a trade idea.

We could actually see a downside break trigger soon – watch the $43.00 level very closely.

Note the downside (red) breakdown price pathway toward $42.00 (first target) then the $38.00 level should sellers win the supply/demand battle on the chart.

However, should buyers hold the current support and then generate a future breakout above the $46.00 per share level, then Yahoo (YHOO) would be a potential bullish breakout buy candidate to trade toward $50.00 then perhaps $52.00 again.

If you do take a directional breakout trade, place your stop on the opposite side of the trendline (triangle).

We can zoom-in closer and draw a Fibonacci Grid that reinforces the current consolidation and breakout levels:

Yahoo (YHOO) shows the 61.8% Fibonacci Retracement into $40.50 (a downside breakdown target) while the 38.2% level is just above $45.00 per share.

This is just a more complex way of setting targets to play for or breakout levels to enter new trades.

Do additional analysis on Yahoo to see if a breakout trade would be the right strategy for you and incorporate these levels into your current strategies.

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).