Technical Look At Yahoo And Alibaba Following Buyout Rumor

Joel Elconin is the co-host of Benzinga's #PreMarket Prep, a daily trading idea radio show.

Yahoo! Inc. YHOO shares, which are trading higher $0.58 at $43,20, have been in the dumpster since reporting mixed Q4 results with better EPS ($0.30 vs, $0.29) but lower revenues ($1.11 billion vs. $1.19 billion).

Yahoo was approaching the lows of the sharp decline, only reaching $41.97 when takeover rumors from a Chinese media site hit the tape. The ensuing rally found resistance in a familiar area in the issue.

See Also: Yahoo Spikes Up After Alibaba Takeover Speculation

Alibaba Group Holding BABA shares are trading higher by $1.56 at $83.14, and is trading off its highs for the session of $83.48. It may be heading to fill the gap (break inbetween prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading in between those two levels) in price from Monday's low ($83.75) to Tuesday's high ($83.25) that was created when other rumors surfaced concerning fraud on the Chinese internet retailer site.

The issue has the potential of putting a double bottom (technical analysis term used to describe the decline of a stock, a rally, another decline to the same level as the original decline, and finally another rally) in place as Tuesday's skid ended at $80.03. It found support ahead of that level in today's session at $80.16 and staged over a $3.00 rally.