Range Tightening in Yahoo!

Published on Wednesday, 01 February 2012 05:56 Written by TradersHuddle Staff

New York, February 1st (TradersHuddle.com) - Shares of Yahoo! Inc. (NASDAQ:YHOO) closed the trading session at $15.47 placing the price action in a very tight range, given that calculated support is set at $15.35 and the calculated resistance based on an algorithm of peaks and troughs is set at $16.15

Yahoo! Inc. (NASDAQ:YHOO) is a global Internet media company that offers Internet services to users, advertisers, publishers, and developers worldwide. The company owns and operates online properties and services, and provides its advertising offerings and access to Internet users through its distribution network of third-party entities, as well as offers marketing services to advertisers and publishers. Yahoo owns the second largest internet search engine and provides email services to its users.

Yahoo's stock price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Yahoo's price action, as any movement outside its predefined range of $15.35 and $16.15 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $15.35 could spark above average selling. A tiered approach can be a good way to approach starting a position in Yahoo's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.