Trader Mike

There’s a ton of buzz about Yahoo Inc. (YHOO) replacing CEO Terry Semel with Jerry Yang. But in what seems to be becoming a trend for Yahoo, the market is yawning in the face of the news. We saw similar action in May, when news came out that Yahoo had discussions with Microsoft (MSFT) about a potential partnership and/or buyout. That news caused a huge gap up in Yahoo which was quickly faded. The stock finally closed that gap (and then some) a few weeks later. We’re seeing a similar market response on the current CEO change news. This is one heavy stock and clearly its due to institutions unloading into …

Now matter how good the news is, or may seem, at the open I’ve found that it usually pays to wait 30 to 60 minutes to see if sellers step in. On these type of gaps, right into resistance areas after a big gain, this tends to happen more often than not:

I don’t know if that gap will close but whether it does or not at least now I can look for better entry points once I see a reversal attempt. (Which I think is happening right now…)

Today’s gap up and subsequent sell-off made what called a ‘Gap and Crap’, a.k.a. ‘Gap and Trap’. (Funny that StockCharts.com’s annotation tool turned ‘crap’ into ‘—-’. Pretty slick of them.) It sucked in over-zealous buyers at the open and trapped them in losing positions. As some of you know, I have my #1 rule taped to my monitor just for days like this. I really didn’t trust this gap because of the ‘news’ it was based upon, the fact that we had two bearish candlesticks the last two days, the fact that we gapped over the upper Bollinger Band, and finally because we still have the Fed meeting to look …