BABA Follow Up

Yesterday due to popular demand, I covered BABA in Alibaba (BABA) with a first paragraph excerpt as follows:

"...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."

This is more of a caveat to the larger message that BABA's trend/charts look very strong, but a pullback soon looks very probable and their may either be a swing trade there or at least it will tell us if there's a change in character in BABA or offer a long entry opportunity at a lower cost basis and lower risk.

I set price alerts as usual with these pullback trades which have been popping off all morning as BABA is down -3.22% on the day right now, even more than that at 11 a.m. lows.  I'm not going to repost all of the main charts telling BABA's story, they can be found here, Alibaba (BABA), however short term charts need some updating as the situation has changed.

 This is the "seemingly" bullish upside rate of change (ROC), that is really a warning flag that the trend is about to change,  in addition this was also a channel buster, these typically breakout of the channel and quickly drop to either the bottom of the channel or below the channel; it is sort of the same psychological principle as a bear trap or failed breakout.

 I used a 30 bar moving average on a 60 min chart to define the trend and a break of that moving average should lead to a deeper pullback. I'd suspect somewhere around the 50-bar 60 min chart (blue) moving average which is around $110.

I had to widen out the Trend Channel by 1 standard deviation (on the edit indicator change with width setting from 10 to 20) since there's so little history, it's not possible to use a daily Channel, but this channel has held the entire trend including a close call on 10/28. The current stop for this trend is $114.24. Note that's the stop, which differs from the $110.00 guess-timate pullback area above at the 60 min 50-bar moving average.


 Since yesterday (in the red box), the intraday 3 min chart has grown worse to a deeper leading negative divegrence, pulling price down (now around -3%).

After a break of the Trend Channel there can be some sideways volatility, for any counter trend short trade I'd like to see some volatile lateral chop as it would give usa clear picture as to whether BAB is worth a counter trend short swing trade. Otherwise the next trade oopportunity we'd be looking at is a long entry on the pullback so long as the underlying charts stay strong and show accumulation. If this is not the case, then the next trade we'd be looking at is a potential short trade if BABA is in fact deteriorating.

Remember this is not an average IPO as BABA's valuation closed yesterday as the 6th largest US traded company.  The uneasy part of the IPO is the boilerplate/standard 6 month lock up for insider and underwriter shares which in a large part, does not apply to BABA, meaning insiders who normally can't sell within the first 6 months of a new issue (IPO), are not entirely accountable for this IPO standard, there are quite a few shares that are held by insiders and the IPO underwriters not covered under the 6 month lock-up period, one of the stranger components of the Alibaba IPO.

The intraday chart went negative in to the close last night, similar to the VIX divegrence at the same area in which VIX spike despite the SPX closing higher as well. So far the rest of the -3+% down day has been confirmed by 3C, in line.