Yahoo Reverses, Biogen Lags
I don’t like to bet on reversals. As a
momentum trader, I prefer to see stocks that have undergone corrections advance
enough to recoup at least half their losses before looking for entry
points.Â
That said, Yahoo
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YHOO |
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PowerRating) formed a
fine reversal Tuesday ahead of a strong second-quarter report. The Internet
giant posted pro forma operating net of 12 cents a share vs. five cents a year
ago and beating First Call/Thomson Financial’s consensus estimate of 10 cents.
Yahoo shares bounced off
a 52-week low of 99 7/8 to close at 105 1/2, above the day’s open and near the
top of the day’s trading range. Volume swelled to 30 million shares, Yahoo’s
biggest turnover since January. Institutions clearly piled into the stock. In
after hours trade, the stock changed hands around 5:42 p.m. ET at 118 1/4 on
Instinet, the electronic communications network.
It remains to be seen whether Yahoo
can dig itself out from under a mountain of overhead
supply. Overhead supply is the amount of shares in
the hands of shareholders with paper losses. Wall Street calls these buyers weak
holders because they tend to look for exits and sell into rallies, blunting
further share-price progress.
At minimum, I’d wait for Yahoo to clear
its 200- and 50-day moving averages before looking for entries for the
intermediate long trade. Even better, I’d insist that the stock surpass its mid
level, the point where the stock has made up half the point loss of
the recent bear market in the stock. Yahoo’s mid level — the half way mark
between its all-time high and Tuesday’s low — is now at 174 31/32.
Biogen
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BGEN |
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PowerRating) reported Q2
earnings of 43 cents a share, beating estimates by a penny. The results were
propelled by strong sales of the biotech’s multiple sclerosis drug Avonex. The
stock traded at 71 around 5:42 p.m. ET on Instinet.
The stock has made progress toward
forming the right side of a correction-recovery pattern, but it still has work
to do. Biogen shares are far off their mid level, 88 3/4, even as other biotechs have
tackled their mid levels.