This post was just published on ZYX Buy Change Alert.
The long-term core BABA position is long from $68. As of this writing the stock is trading at $84.25. 110% of the full core position size is being held. Profits have been taken as high as $110.63.
Lately BABA has not been trading well. In our analysis, the prime reason for the selling in BABA is that traders are trying to get ahead of the IPO lock-up period for about 14% of the companies publicly traded stock that ends tomorrow.
Lately the pattern has been that the day the lock-up period expires, the stock starts going up. There is no guarantee that this pattern will be repeated for BABA as there is nothing that is ever consistent in the stock market. However, the only way to trade is based on probabilities. The probability is better than even that if the stock market does not tank in the U. S., Hong Kong and Shanghai, $80 may be a low for BABA. Since BABA is a Chinese company listed in New York, it is important to pay attention to the stock market in Shanghai and Hong Kong.
Consider accumulating up to 40% of the full core position size in the zone of $78.31 to $84.30, preferably below $82.56 as a short-term trade around position. Target zone is $91 to $95. Stop zone for half the position is $77.23 to $77.38. Mental stop for the remainder of the trade around position is under $74.73.
Caution: This trade around position is not suitable for those who are already holding 110% of BABA for the long-term position and are holding a fairly large position in JD. The reason is that JD competes with BABA and in the event of a market downturn, both JD and BABA may fall in unison. In simpler words, this trade around position is suitable only for those who do not have a long-term position in BABA or those who are holding less than 60% of the full core position size for the long-term when adding both BABA and JD positions.
This trade around is separate and distinct from the long-term core position.
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