Youko.com Inc. needs to reverse the downtrend

Jun 20th, 2011 – Comment

Good Morning Lou,   Would you be able to give me any insight into this Chinese Internet company – Yoku?  I’m thinking about adding to my holding while it’s down.  I haven’t found anything good on the Internet in terms of analyst recommendations.  Is it too risky in your opinion?   Thanks Lou, Susan Hi […]


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Good Morning Lou,
 
Would you be able to give me any insight into this Chinese Internet company – Yoku?  I’m thinking about adding to my holding while it’s down.  I haven’t found anything good on the Internet in terms of analyst recommendations.  Is it too risky in your opinion?
 
Thanks Lou,
Susan
Hi Susan,
Youko.com Inc. (YOKU NYSE) is touted as China’s YouTube which explains some of the excitement that came into the stock when it went public in late 2010. The shares are trading off the highs as some investors took advantage of the opportunity to get liquid. When the ducks are quacking – feed them!
If YUKO is in fact the YouTube of China you have to expect that the journey to profitability will not be a short one. How quickly they proceed to the promised land and the challenges that they encounter along the way will provide the defining moments for the stock.
With regards to analyst coverage, Goldman Sachs covers the stock and on June 16, 2011 they put the shares on their conviction buy list with a target price of $55.00 while Maxim Group cut their target price.
The charts will provide some insight into how to proceed from here.
The one year chart illustrates the big pop and the bigger drop that YOKU has cycled through. The stock took off in February of 2011 from a base at $3o.00 and ran to $70.00 by mid April. A double in sixty days will always get investors booking profits. Its just the right thing to do.
Both the MACD and RSI signalled that it was time to get out of Dodge given that the stock got overbought and the momentum was shifting to the sell side.
The six month chart depicts the double top that formed in mid April. A double top is a reversal pattern which in concert with the indications from the MACD and RSI, provided all the information a savvy investor would have needed to preserve capital.
You asked about adding YOKU  to your investments to take advantage of the low prices.  The best time to buy a stock is when it is going up in a established uptrend with support along the trend line. At this moment we are trying to call a bottom which is a higher risk undertaking.
YOKU did catch a bounce on June 17,2011 and gap up the day after the Goldman recommendation. The MACD and RSI both seem to be signalling a move higher but  faintly at this point. If it continues to move higher it will meet resistance at $30.00 and then again at $32.50. The best way to manage this stock if you decide to throw capital at it is to trade for profit . Chip away at it as it tries to establish an uptrend. If that happens that would be the time to load up on YOKU.
Make it a profitable day and Happy Capitalism!
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