The Bet:
We recommend opening a buy bet in June Yell (Expiry June 18th) at £50 a penny when the quote is standing at 173p - 174p. The target is 210p initially and the stop loss at 159p for a risk of £750 at our suggested wager.
The Fundamental View:
We are going bottom fishing in directories group Yell on the basis that all the bad news and almost anything else that can be thought of is already in the share price. The reason for the sharp decline in recent weeks has been a combination of concerns over the economic outlook, ad revenues and the debt position of the company. However, last week broker ABN Amro suggested that the extent of the sell off in Yell was an over reaction, especially given the way that US peers R.H. Donnelley RHD) and Idearc (IAR) have both been performing strongly .
Given that part of the decline in Yell was due to the prospect of FTSE 100 demotion it should now be the case that bulls can focus on the way that in February it did reiterate that it would meet year end earnings and cash forecasts.
The Technical View:
The break of the 166p intraday neckline of the March reversal formation in Yell is one of the most spectacular charts around, with the message being that while above 166p one should be buying any dips towards this level. As far as the upside is concerned the most obvious destination is the February resistance line projection heading towards 210p, something which would make for substantial upside from current levels.
The stop loss of 159p allows for a cushion below the 166p neckline.
Conclusion:
Open a buy bet in June Yell after recent severe share price losses are seen as an over reaction.
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