Is it time to bid on a bottom in Alibaba (BABA)? Not quite…but probably very soon. (September 21, 2015)
I want to look at Alibaba ( NYSE:BABA ) and here’s why: I mentioned it, actually in this morning’s note, as a potential long. But specifically what I was talking about is the fact that there’s a much anticipated lockup that expired today. And that’s typically almost always the time when you’re going to see a big bunch of pressure put on a stock as insiders say, “Well, okay, finally I can sell my stock so I can exchange stock here for ‘dough’.” I’m sure they would have rather done it at $1.20 as opposed to $63.00 but it is what it is. My point was, look, if this stock starts to move higher, in light of this big lockup expiration, then that tells you that there’s a lot of selling that’s basically over and there’s finally demand for this stock that’s soaking it up. That’s not what happened.
We’re looking for this rally, we’re looking for a higher close, but we’re not getting it. We didn’t have huge volume today, but what happened was the stock just continued to trended lower. So does that mean that we don’t want to look at Alibaba ( NYSE:BABA ) anymore? No, that’s not the case. First of all let me say that unequivocally, I’m not trying to pick a bottom in this stock, I’m not trying to identify a bottom. This is the “slope of hope” or as some would say, like me, the “slope of dope”. This is just built on the broken backs of bulls that haven’t exactly worked out well. So what I want you to do is just watch this stock. If it starts trading and holding, HOLDING, above the 20-day moving average, 65.00, 66.00 67.00, around there, then you can start looking for a bottom on this stock. Right now we’re not seeing it yet.
Time could show that this was actually the bottom here, but shoot, you could say that for a lot of stocks. But what I want to see is this stock starting to close above the 20-period moving average. That will give me a lot more comfort that the downtrend has morphed into a base. This is a Chinese stock, those things have been taken out to the woodshed and beaten with an ugly nunchuck. So don’t just be buying this stock because I’m looking at a potential for more upside here. Instead watch the stock. If it starts to move higher, look at the weekly chart, if it starts to move higher and you see a white box outlined in green like this, that’s the time that you can start buying this stock.
Free Chart