For the 2015 InvestorPlace Best Stocks of 2015 contest, I have chosen a stock that had a bit of controversy in the fall of 2014: Yahoo! Inc. (YHOO).
With a large stake in Alibaba (BABA) before it went public, there was a lot of debate about whether Yahoo had any value outside of its connection to BABA. Holders were polarized around that concept and looking to get out just before the Alibaba IPO.
In the other camp were the technicians, like me. We have seen many old, large-cap technology names making moves out of very long bases to the upside, and Yahoo looks ready to be the next one.
I chose YHOO stock because of that backdrop. I like stocks that have a mosaic of technicals backing them up.
The monthly chart of YHOO shows three big reasons that Yahoo stock will move higher in 2015. The first is the long break of an ascending triangle. The triangle was about $39 wide at its base and so looks for a move higher of $39, to about $82, on the break out higher. This triggered on a move over $44 in late October 2014.
The second is a pattern called a Cup and Handle. This pattern looks for a move higher equal to the depth of the Cup (which fell as low as $31.50), which would send YHOO stock to $73.50. The final piece is the accumulation/distribution statistic. YHOO has shown accumulation since September 2012. Perhaps the narrative above about Alibaba drove that accumulation, but notice that Yahoo has continued to be under accumulation since the Alibaba IPO.
Certainly a move from about $50 to $73.50 or $82 is a good potential return, and a look at the short-term, daily chart shows you do not have to take a lot of risk in the trade. The Activity from mid-November has created a bull flag.
Flags are often thought to be at half mast, or in the middle of a run higher. For a short-term trader, this flag signals a chance to enter on a move higher against the bottom of the flag, for a move that targets a move higher to $63.50. The momentum indicators are also starting to turn up and in the bullish range.
For a longer-term investor, this means you might get a lot of the potential move in the short run, allowing you to enhance the return by selling covered calls after the price stalls.
No matter how you look at it, YHOO stock carries plenty of opportunity in 2015.
As of this writing, Greg Harmon holds put spreads on YHOO.