Looking for a way to trade Alibaba without getting an ulcer? Look at Yahoo! (YHOO) (September 05, 2014)
I want to talk about Yahoo ( NASDAQ:YHOO ) a little bit, actually more specifically, Alibaba. Everybody’s all lathered up about that IPO, I’ve heard so much talk about this; I don’t need to know anything about it, it’s just in the headlines, Yahoo’s ( NASDAQ:YHOO ) big owner etc. I can’t imagine that stock being higher on the second day that it is traded, at all, because there is so much enthusiasm about it that I think you’re going to get just the big massive pile in right away. Everybody’s got to get this stock, it’s like the second coming of Google ( NASDAQ:GOOGL ), NOT.
The point is, if you’re going to buy Alibaba be a day trader, that’s all I can say. “Play,” I don’t think there’s anything about “playing” in the stock market but a lot of people talk about that. It’s like, “Another way to “play” such and such.” You play football, you don’t “play” with stocks, but if you want to “play” Alibaba you can look at Yahoo ( NASDAQ:YHOO ) because this is going to wind up being a good trade one way or another. I could guess, and then if I’m right I would really impress you, but I’m not going to do that.
Forget about Alibaba for a minute, the stock’s trading in a really nice multi-moth little cup here. What you would hope is, that you would get a little handle down here, and then a breakout, it could happen, but I’m just looking at this more short-term. If Yahoo ( NASDAQ:YHOO ) breaks out and closes above this high of 41.72, so you’ve got a couple more dollars to go, if it closes above that level, then this is a stock that’s probably done consolidating and it’s likely going to continue higher, you can really see it on the weekly chart.
My bet is, first of all, I’m not some clever individual who has decided, “If you want to get in on Alibaba’s IPO just buy Yahoo ( NASDAQ:YHOO ).” That’s not exactly a news breaking idea, that stuff has already been baked into the price of the stock. Do you really think that it’s that easy to just buy Yahoo ( NASDAQ:YHOO ) and get the same bang for the buck as you would have if you had bought Alibaba somehow before the IPO?
The bottom line is, in my view this an easier way to trade Alibaba. If Alibaba pops way up you’re going to get every knucklehead in the world buying Yahoo ( NASDAQ:YHOO ), which is fine; maybe the knuckleheads will turn out to be right, again, if the stock breaks above 41.72 or so. But if the stock gaps up and Alibaba starts rolling over, first of all you’re going to be able to short Yahoo ( NASDAQ:YHOO ) you can’t short an IPO, at least I don’t think so. So this could turn out to be a good short. Ultimately though, I think that if you wind up getting a decent pull back in Yahoo ( NASDAQ:YHOO ) it would be a good trade on it’s own, but for now I’m just looking at it as kind of a smoother, lower risk vehicle for trading around this Alibaba thing.
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