Identifying a High Probability Trade

In the June 20th, 2015 issue of Season Forecaster newsletter I covered a short trade analysis on Yahoo (YHOO).

In December the stock failed to set a higher high, and Yahoo's earnings report in late January was disappointing. The stock had been trading in a tight trading range of 42 to 46 since then and was not been able to attract buying.

The stock had just broken to a new 7-month low, and had formed the colorfully named ‘Death Cross' pattern, which is when the 50-day moving average falls below the 200-day moving average. For this to be flagged as a real bear market in the stock, the 200-day MA should be curving downwards and volume should be high on many down-close days. But it still wasn't a good picture.

I showed how the fundamentals supported the picture of a weakening company (assuming the sharp drop in recent earnings wasn't due to heavy investment in a new product/service line, and it didn't appear to be).

I presented the seasonal pattern showing that over the next 8 weeks, YHOO had lost an average 2.2%, with losses in 14 out of 19 years. Many of those losses were double-digit drops.

It has now been about 8 weeks. Since my June 20th article, Yahoo reported another sharp drop in earnings:

And the stock has continued to plunge:

Fundamental, technical, and seasonal analysis all combined to identify a high probability short trade. It is how I approach every trade setup I present in the Seasonal Forecaster newsletter.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2015 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

The content on any of Market Tamer websites, products, or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options, and other securities involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

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