Has BABA bottomed?

Posted on Tuesday October 13, 2015

After the September 12th,  2015 article in Barron’s  and some capitulation, BABA has managed quite the short squeeze rally. I will be honest with you, I have not read the article and personally don’t care because it’s all noise. I don’t care what is in the article, if you are reading it, some big hedge fund manager already knows it. Trust me, they do. And if they do, then the news is already in the price. So let’s ignore all the “NOISE”, and lets look at what price is actually telling us.

Has it bottomed? 

My answer to that is not officially but is showing some signs. 

Let’s begin by looking at how this recent rally started.  If we look below, on the hourly chart, you can see that this rally began with an mini Inverse H&S, setting a “Higher Low” on an intraday time frame and then using short interest as a catalyst, has been able to make a nice strong move.

Additionally, during  the current rally, the stock has

  1.  broken it’s shortest term down trend line
  2. gained the 50DMA (although it is still declining) will need time to change that.

However we must take note of the risks that lie just ahead.

  1. Much like the indexes (spx, compqx , djia) overhead supply is lurking ahead. In BABA, that is Around $75.
  2. We have the longer term down trend line to compete with as well.
  3. Declining 200DMA, which is looking to collide with the stock, overhead supply and the declining trendline at ~75

 

 

So for me I’m in wait and see mode. As I do with everything, I will keep an eye on it and enter when I think that risk/reward is there. That is certainly not at this level, as without a higher low, my stop is too far below.

 

My plan on this one would be to set an alert for $62-$63, and re-evaluate. If it looks like it can put in a higher low there, I’d be a buyer and only own it above 57.32 ( the low)

 

If this is going to bottom, I expect to see price action like below. 

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