Alibaba (NYSE: BABA)

Alibaba Group Holding Limited, through its subsidiaries, operates as an online and mobile commerce company in the People’s Republic of China and internationally. It operates Taobao Marketplace, an online shopping destination; Tmall, a third-party platform for brands and retailers; Juhuasuan, a sales and marketing platform for flash sales; Alibaba.com, an online wholesale marketplace; Alitrip, an online travel booking platform; 1688.com, an online wholesale marketplace; and AliExpress, a consumer marketplace.

Take a look at the 1-year chart of Alibaba (NYSE: BABA) below with the added notations:

BABA was trading in a large, sideways range up until its mid-2016 break through its key resistance level of $85 (green). After that break, the stock rallied higher up to $110. BABA’s recent 3-month decline has brought the stock back down to the $85 breakout level, which should now act as support.

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The Tale of the Tape: BABA has a key level at $85. Traders could enter a long position on a test of $85, with a stop placed under that level. A break of $85 would present an opportunity to short the stock.

 

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

@cmtstockcoach