BABA Follow Up

It hasn't been that long since our original BABA post on 11/10 predicting a Channel Buster pullback below its channel which some of you shorted, but the intention of the post was to see if BABA still had gas in the tank and thus a worthy long trading position or if BABA is transforming with the Channel Buster and a change in character and trend is in the air.

The last update on 11/24, BABA Follow Up showed this chart with the following excerpt forecasting what BABA would do next...

This chart is from the 11/24 post...

" If BABA pulls up to the underside of the channel at the yellow arrow and gracefully backs off, there's a good chance it forms a stable base and makes an excellent pullback trade, there hasn't been so much damage that this kind of pullback long is ruled out. However if it enters the channel, chances are things will get ugly and it may turn very ugly which may be the start of a whole other trade we are yet to consider. There will be stops and limits in the channel, that you can be sure of (red arrow)."

As you can see, BABA did NOT enter the channel again which would have made it a high probability short, instead it backed off at resistance and pulled back which was our first scenario.

Since, as we are looking for the highest probability trade in BABA...

 On the BABA daily chart you can see the original Channel Buster in yellow, this was when we first posted on BABA that this breakout move would lead to a sharp pullback BELOW the channel. The post above from the 24th was from the pullback area (white) to its bounce area (orange) which stayed out of the channel, reducing at least for that moment, the chances of a BABA short trade entry and has "gracefully" or as gracefully as possible considering this morning, pulled back to the expected area.


 Just like the market averages this morning, BABA found some support on heavy volume or a short term oversold (like mini capitulation) move which you can see on this 60 min chart at the white arrow, but even better below...

A 5 min BABA chart.

Other than the volume surge concept (as a short term support area), the other concept is the VERY parabolic nature of the early decline, as you know , whether up or down I don't trust parabolic moves to hold very long (on their respective timeframes), before some sort of at least corrective behavior occurs.

 Our X-Over Screen (60 min because there's not enough trade data to fill out a daily screen) , has issued a sell/short signal. A bounce to the yellow trendline (10-bar... 60 min), would normally be the first correction and thus likely a short entry. Our second and third indicators to confirm have both done so. On a daily chart, while we don't have enough data to form a full screen, 2 of 3 indicators are moving to a larger sell/short signal.

As for 3C charts...

 The 60 min chart which was so strong and confirmed (green arrow) before it went negative at the Channel Buster (red) hasn't really done much in the way of more damage or repairing damage, for now I'd have to call it neutral.

 However the more detailed, 15 min chart still strong, but not as strong as the 60 min chart,  shows the original distribution (Channel Buster), the bounce we expected and some accumulation for it and the distribution at the top of the bounce.

Unless BABA pulls back and forms a wider base with much stronger positive signals (which aren't here yet), I suspect BABA is going to be a short sale, it may even be one on a bounce to the 10-bar 60 min moving average so I'd set some price alerts in the area.

 This 5 min chart would show improvement if there were any to speak of for a pullback/bounce trade, right now I don't see it making BABA look more and more like a better short.

I would not short such a parabolic move lower this morning or chase price, I'd be taking a close look at BABA near the 10-bar 60 min. moving average which is where I suspect it is going broadly with the market as a whole on a short term oversold bounce from this morning's deep, parabolic drop.

So far the intraday 3 min chart just put in it's first positive divegrence, this is what I'd expect to see for a bounce to the 10-bar moving average, but this is not the overall pullback accumulation of a long trade we though was a possibility, which is why we have been stalking BABA.

I suspect it will be a short and at a decent entry with lower risk, but I want to confirm that and get a good entry with low risk and high probabilities.

If you are interested, don't forget to set those price alerts I mentioned. BABA just hasn't seen the recovery it was capable of on its pullback from the Channel Buster.