Current Trend (W): Down (Insufficient data for Value Zone, but weekly lower lows and lower highs)
Abv/Below Value Zone: N/A
Next Scheduled Report Date: 12 August 2015
52 Week High: $120.00
52 Week Low: $77.77
Current Relevant Resistance: $105.20
Current Relevant Support: $77.77
Recent Close: $89.98
Comment: I’ve been debating writing this post for several weeks now. BABA is setting up in a pattern eerily similar to that shown by FB a couple of years ago. Enormous pre IPO size and hype around the deal… big IPO… lackluster to negative performance after the public offering… Even the charts have a fairly strong resemblance. Yes, I know that BABA sits at a much higher dollar point than FB did at the same point in its pattern, but when has that ever stopped a stock from getting going? Besides, when FB went public, there was still a fair amount of faith driven investing… that the company would be able to monetize its enormous subscriber base. BABA was already a money machine when it debuted…
And we see how that worked out ultimately…
Facebook has been one of my best performing calls, and I made the call in circumstances very much like those facing Alibaba right now.
I like the idea of playing for a major reversal in BABA using the weekly chart as both trend indicator as well as for an entry trigger. To that end, I think the High of the Low Bar from the week ending 8 May suggests a good entry point with the low of the same bar used as a stop. In this case, traders would look for a long entry as close to $89.29 as possible. If taken long, a hard stop should be placed a few ticks below $77.77.
To be clear, I am NOT saying BABA will definitely mimic Facebook’s performance. However, the potential substantial reward weighed against the reasonable and controllable risk makes it a trade worth considering… more than once if need be.
Hope it helps.