Fibonacci Revisited
On July 11 after the
close, Yahoo! (YHOO)
reported its second-quarter earnings result of one cent a share profit. It was a
penny better than the consensus. This news ignited Yahoo!. In afterhours
trading, the stock jumped more than two points. On July 12 before the open,
Merrill Lynch upgraded Yahoo! to near-term accumulate from near-term neutral,
and USB Piper Jaffray pushed the stock up to buy from neutral.
Yahoo! gapped 1.02 points (5.8%) above the July 11 high on the open, but the
overall performance for the day was disappointing. The stock’s 50-day moving
average seems to be a culprit for stopping Yahoo!’s advance, but slightly below
the average line, we can spot another obstacle — the 61.8% retracement level of
the July 5 high to the July 11 low. Of course, 61.8 is a Fibonacci level. Now, I
don’t know the exact amount, but there must be a significant number of Fibonacci
believers.
Let me give you another example. On
July 13 before the open, Teva Pharmaceutical (TEVA)
was mentioned in Business Week magazine. It stated, “TEVA is a good
way to play both generic and brand-name drugs. A rising number of drugs coming
of patent provides tailwind for a company’s growth.”Â
As you can see on its daily chart below, TEVA did not react to the news
favorably. It failed to take out Thursday’s high and formed an inside bar. Here
again, the force of Fibonacci was at work. Thursday’s high coincided with the
61.8% retracement level of the June 15 high to the July 5 low.
I must say, those Fibonacci fans are
everywhere.