What about YHOO!

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How to view the entire chart:


1. Try clicking on the name of the most recent article in the column on the right. This will remove the "Archives" list.
2. Try right click on the chart itself and open it on a separate window.


I am sorry that I cannot always make the chart small enough to fit neatly on the left column. I want you to be able to see the details I want to point out.


I Hope this helps,


Juan

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I found YHOO today using Skew Finder 2. The IV on July options is higher than the IV on Oct. Options. The stock has been moving sideways for several months and it is likely to break down, along with the poorly performing markets. Here is an approach I have been backtesting in case the forecast for a bear market materializes. My game plan in going to have to adjust a little. However, I have not yet committed to play vertical trades, even with my knowledge of Elliott wave theory.

First, let's examine the probability of YHOO entering a downtrend. In order to do proper Elliott wave analysis we have to evaluate the a long-term count and synchronize the counts with shor-term portions of long-term incomplete waves.

According to the robust (highly rated) long-term count, YHOO is in an incomplete wave (y) of a (d3). That is a double three, which is a WXY series, each wave formed by an ABC combination.


Since 2001, this wave (y) in progress, should form a zigzag. This zigzag is formed by an ABC series where A and C are impulses. The count below suggests that A was completed (although it is labelled as a wave (I) impulse, it is really a wave A impulse. Since the program can only analyze this portion, we take it for granted that it means that YHOO completed an impulse and it is now in corrective series that started in late 2005. This synchronizes well with the long-term chart, again, because I am looking for a zigzag. However, should YHOO be truly in a 5 wave impulse, the better match in the long-term chart would be a FLAT. We have plenty of time to confirm that, without altering my short-term forecast.


Thus, a second wave (II) of an impulse or a wave (b) of a zigzag is now in progress. Thus, I analyze the series with the filter for a corrective wave II of an impulse. The chart belowshow the most current count:

This count suggests that YHOO may go as high as $34/share before completing the corrective wave II. While the intermediate wave above is telling us that the correction may have completed, it does not rule out further correction. Yet the most recent count suggests that the correction is a double zigzag or DZ. Since the DZ is a WXY series, wave Y is still to come and will resemble W. The possibility of YHOO go to the mid 20's before restarting the long term rally, is quite high, according to this count. All we need now is an entry point and a good trade to take advantage of the skew in the options and the potential bearish sentiment in the stock market in general and YHOO in particular.

This is the trade I intend to enter, should a proper signal to enter this market becomes clear.


With conventional analysis I can tell that YHOO is hitting mayor resistane overhead at the top bollinger band. Although the stock is just above the 50dMA, as it crossed that mark today, it pulled back near the line. The stochastics seems to be ready to give us a sell signal.


Here is the volatility skew between the long and the short legs of my trade.


I would like to show you how I preview a trade using the Trade Calculator. This is good because it tells me that OptionXPress is going require $7500 in cash because of the diagonal aspect of the call portion of the trade. Yet, the trade is done at a debit. Thus, it is a $21000 trade, not a $13500 trade. I would not want to spend more than $20,000. So could wait until the skew increases.