Yahoo (YHOO), originally featured in Short Trading Idea: Yahoo (YHOO) Reminiscent of 3COM (COMS), continues to form the right shoulder of a bearish head and shoulder pattern ahead of Ali Baba's (BABA) IPO. Currently expected sometime early this month. The consolidation could be viewed as a bullish cup and handle base, but the pattern is a later stage base, wider and looser then any other consolidation in its entire run, and each rally attempt over the fifty day moving average has either stalled or been in below average trade. Increasing the likelihood of a rollover.
Fundamentally, outside of the cash the company will receive from the Ali Baba (BABA) IPO, already priced in, sales and earning's growth are projected to be negative over the next three years. Even with the new cash pile from the IPO, the company has failed to prove that any of its recent acquisitions will contribute to the companies top and bottom line growth in any significant way. Margins have been shrinking and returns on equity is a poultry 10%...very low in comparison to the stronger internet companies.
Yahoo (YHOO) has lost its 1990's glory of being the internet king to the likes of Google (GOOG), Facebook (FB), Twitter (TWTR), and even Microsoft (MSFT). Without any real growth, Yahoo (YHOO) will rollover from these levels and ultimately retrace most, if not all, of the stocks 254% advance over the last two years on the Ali Baba (BABA) hype. Aggressive traders could begin shorting the stock up at these levels with conservative investors waiting for the day of the Ali Baba (BABA) IPO opens for trading. Protective stops should be placed near recent highs around $39.60. The biggest risk to shorts is the uncertain timing of the Ali Baba (BABA) IPO. But like 3COM's (COMS) last hurrah before the Palm (PALM) spin off, Yahoo's (YHOO) days are numbered.