Yahoo – Continues to Perform

I said I was a fan of Marissa Mayer – Yahoo’s current CEO. (Blog)

Yahoo stock price continues to perform, since my blog post on August 21, 2013.  Of course let’s start with our model price chart of Yahoo as of Friday, September 27, 2013.

Yahoo! Inc. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

Yahoo! Inc. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

For those interested, a daily updated chart of YHOO subsequent to this post will be maintained on Facebook, here.

I love this Trading Pattern

I have said many times before I hate technical analysis.  Many people think our model price charts are technical analysis.  But let me go one step further, which will be controversial to many, I believe the whole body of work or what is considered technical analysis is a more complicated and roundabout way of picking up the interaction between our EBV lines and the company’s stock price.  I can hear the critics booing from the cheap seats on this statement.  But trading patterns do emerge when talking about fundamentals just to make everything I said previously more complicated.

When fundamentals are charted, along with the company’s stock price, patterns to occur.  The trading pattern with Yahoo, as displayed in the above model price chart is one of my favorites.  As you can see in the middle of May, YHOO traded to the top of EBV+3.  Nine weeks later, in the middle of July, YHOO had a positive transit of EBV+3 with a pull back under in the following week.  Seven weeks later YHOO had another positive transit that I highlight as ‘Break Out #2’.

The reason why I love this trading pattern is fundamentally the market – through YHOO’s stock price – is testing whether it belongs, valuation wise, in a higher zone.  The first transit, ‘Break Out’ on the above chart, I rationalize the market is testing whether YHOO actually belongs in the zone between EBV+3 and EBV+4.  The shallow pull back is the market contemplating whether a transit is warranted.  The second positive transit, especially on no corporate news, is the tell tale sign the market has changed its opinion on YHOO and that a higher valuation zone is validated.

Again, this is fundamentally driven, as YHOO is achieving a higher magnitude of economic velocity and the market is signaling its approval with a higher valuation of the company’s shares.

EBV+3 is significant for Yahoo

I have reproduced our long-term model price chart below as well.

Yahoo! Inc. with monthly price bars, EBV Lines (colored lines) and model price (dashed line)

Yahoo! Inc. with monthly price bars, EBV Lines (colored lines) and model price (dashed line)

As you can observe YHOO had a negative transit of EBV+3 back in 2008.  For the last 5 years YHOO’s stock price has been languishing under this EBV level.  YHOO having a positive transit of EBV+3 just recently highlights a milestone for the company’s valuation and signals increasingly positive fundamentals with YHOO achieving valuation liftoff with this latest positive transit.

Conclusion

Things are looking up for Yahoo after years of seemingly management misfires and boardroom antics.  Marissa Mayer, Yahoo’s current CEO seems to be shaking things up with new acquisitions and initiating a mobile strategy.  Also, don’t forget Yahoo’s holdings in Alibaba Group that will be coming to market in a high profile IPO later this year.  Model Price is confirming and giving a higher valuation to a company that has stagnated over the last few years and under Mayer’s guidance seemingly relevant again after years of misdirection.

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