Youko Surged On Consolidation Play

Published on Monday, 12 March 2012 17:20 Written by David Becker

New York, March 12^th (TradersHuddle.com) – Youku.com (NYSE: YOKU), which is China's largest online video company, is scheduled to buy second-ranked Tudou Holdings Ltd for more than $1 billion to create an industry leader in the world's biggest Internet video space. Youku, which is similar to Youtube, is trying to consolidate the industry, which has too many players in China.

YOKU stock price has had a nice run up in 2012, moving higher by approximately 55%, after testing 52-week lows near the end of 2011. Price action tested $27, before pulling back to $25. Target resistance on a break of $27, would be the 50-week moving average near $29, and then the highs near $40, which were created in April of 2011. The stock fell in line with the Chinese stock market for most of 2011. Support on the stock is seen near the 200-day moving average at $24 and then the 50-day moving average near $21.

The stock is forming a flag pattern above the 200-day moving average and above former resistance, which is now support near $25. The RSI is printing near 58, which is the high end of the neutral zone. The relative strength index has remained in neutral territory for the past 8-months.

Momentum on the stock price has declined significantly and is currently reading close to zero. The current consolidative tone has created a sell signal on the MACD (moving average convergence divergence index) where the spread (the 26-day moving average minus the 12-day moving average) crossed below the 9-day moving average of the spread).

The Rate of Change (ROC) indicator, which is also referred to as simply momentum, is a momentum oscillator that measures the percent change in price from one period to the next. The ROC calculation compares the current price with the price 12 periods ago as a default. This is also showing a neutral tone to price action.