Alibaba (BABA)

I've had some inquiries about BABA (Alibaba) recently and this recent tear it has been on. I personally would not consider this stock a short whatsoever, however it may be building up to a pullback that is worth a swing trade short (or options),  it's on that pullback that we'll know what kind of shape BABA is really in.

You may not recall, but this was one of the stranger IPOs of recent memory, for quite a few reasons, but one being shares held by insiders and the underwriters of the IPO that are not locked up as part of the boilerplate 6 month lock up for these types of shares on a new issue, which smelled fishy.

Right now I can't say there's anything other than strength in the underlying trend, as short as it is (historically)...however there are signs of a change coming which is likely a pullback. This pullback may make for a nice long entry or it may tell us something is starting to sour with BABA and to look for tactical positioning. Movement is the key, it tells us a lot.

 BABA daily chart shows price peeling away from the trendline in a "seemingly" bullish way, however this change of character more often than not, leads to a bearish change in trend.

In this case the move is called a Channel Buster and they often reverse to the lower end or break through the lower end of the channel just as fast as they breakout of the upper resistance trendline of the channel. As such...

Here's the same trendline drawn as a clean channel and the Doji star pause right at resistance followed by a breakout above the Channel. There's no doubt this looks very strong, very bullish, but history has shown us again and again, these types of moves are a red sign flashing that a change in trend is coming.

 On a weekly chart, just to boil the trend down to the basics, this is as strong as anything out there, a decline in volume on the price decline, a rise in volume with the price rise and an exceptional candlestick with strong volume. Volume should ALWAYS expand on a move higher, one of the big things this market has been missing for years.


 I can show you on a daily Bollinger Ban although it's a lot less data or on a 60 min like above, BABA walking the upper band is very bullish, there haven't been any breaks of the middle moving average.

 The 60 min X-Over screen shows the long signal which remains in effect currently. Honestly, this screen looks great.

The 2 hour 3C chart with accumulation at the lows and confirmation since.

The same on the 30/60 min charts

The 10 min chart is the same, but also the first place we see a significant change in character with a negative divegrence in the area of the Channel Buster. I'd suspect if insiders were selling non-locked shares, they'd be doing it here.

 The 3 min chart shows the same trouble in the same area,  so I'd expect a pullback. HOW BABA ACTS ON THE PULLBACK TELLS US A LOT, whether this is a potential long opportunity of whether the show is over already.

You can keep an eye on the 30 bar 60 min moving averages, I suspect it will be broken on a pullback, you might want to set some price alerts there.

And the 60 min Trend Channel had to be widened out as a daily channel doesn't have enough history. If you are using the TC, just widen the width (standard deviation) setting from 10 to 20-2 SDs.

This channel held all of BABA's move including the consolidation. Again, look for a pullback around the 60 min 30 bar moving average, we'll see what underlying trade looks like there.