Alibaba (BABA) Short-term Prospects
A member asked what I thought of Alibaba (BABA) this morning. He’s been away from the markets and does not want to give back recent gains. As I’ll explain herein, the answer lies within a context only you can provide. Basically, it depends on your goals.
- What was your entry point?
- What are your gains to date?
- What are your goals?
We entered BABA last week as it broke out of its base. The reason is simple. The company is a behemoth in a massive market. BABA is also a key player in everything related to China and e-commerce. Tencent, JD, and Baozun currently round out the list, though IQ just started trading.
“Tencent-backed Kuaishou buys rival AcFun in Chinese online video battle”
Check out this article. IQ is in this growing industry group.
BABA Daily Chart – MarketSmith
Technically speaking, Alibaba (BABA) just broke out of a four-month consolidation. Prior to this quiet period, the stock was trending higher from the breakout period in March 2017. Therefore, a breakout of this base signals a bullish continuation in the months ahead.
Additionally, relative strength compared to the S&P 500, or the (RS) line, is rising at 88. Volume is increasing
Fundamentally speaking, earnings-per-share rank is 96%. And, the company’s relative strength in its industry group is A+. compound that with the company’s growth rate of 33%, and Alibaba will most likely continue higher from this consolidation pattern. This isn’t a guarantee; it is merely an educated guess based on the technicals and fundamentals available.
Alibaba (BABA) Weekly Chart
This weekly chart tells the story of BABA’s recent past. If we only focus on price action and ignore the notes, we can see the recent consolidation only occurred after the break out from the 100 (+/-) level. Once again relative strength rating is (88) and rising.
Leaderboard is a nice addition to the Investors Business Daily lineup. All the notes are auto-populated.
Market and industry performance, fundamental performance, and technical performance are conveniently located in the left panel.
Considering all of these factors, we are more interested in potential “future” gains.
The answer to the three questions at the beginning of this article are:
- Entry point 198 (+/-) average. We are adding to positions.
- Gains to date: 5.89%
- Goals: Swing +20% (5% trailing stop)
Since our goals may differ, it’s important to review your positions from a risk management perspective on a regular basis. If we have a risk reward of 2 to 1 we need at least 10% to meet our short-term goals.
Join us live during the morning broadcast as we talk more about this position.
PS: AABA is a less expensive alternative, that moves in tandem with BABA.
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