Typically when the RSI hits a figure below 30 the stock is oversold. When that number creeps below 27, the stock is reaching the significantly oversold position. Not many stock go lower than 24 other than complete destruction of the stock.
Millennial Media (MM) is trading around 26 on the RSI as the stock plunges further to nearly $7 today from $8 on Friday. Remember the stock was trading over $14 prior to earnings. Incredible to see this much destruction with revenue growing 55% this year. Traders clearly do not believe the updated guidance. The fear is that Google (GOOG) is and will eat their lunch.
The stock action is amazing because logically Yahoo (YHOO) should want the independent mobile ad network to compete against Google and Apple (AAPL). Just don't see Google dominating the mobile display sector without a player like Millennial competing with it. The chart though tells a different story. See below:
Investors will be wise to buy this stock as it settles out. At $565M, Millennial is becoming a very cheap stock with huge growth.
Disclosure: Long MM. Please review the disclaimer page for more details.