BABA - Change of Character

Welcome back, Traders and Wealth Builders.

Back in September of 2014, Chinese Internet retailer Alibaba (BABA) went public in what was the largest IPO of all time at least in terms of market capitalization.  After a nervous opening day (perhaps due to the previously botched IPO with Facebook) BABA opened in the 85 range and soon rallied all the way up to the 120 area.

After that it was a slow grind down and BABA disappointed many initial investors.  Earnings have been decent, but the prospect of ongoing litigation regarding not doing enough to stop the selling of counterfeit goods as weighed on the shares.  And your humble blog author lost some money on the shares, looking for a low around 90 but washing out in the high 80's once the shares broke down.

But things changed when the company reported earnings back on 5/7/2015.  Not only did earnings beat estimates by almost 100%, the issues around litigation seem to be resolved.  Since then there has been a steady stream of good news including a partnership between AAPL and BABA.  Add to that the fact that fellow internet retailer AMZN shares have been on a rip to the upside along with the rest of the market.

Taking a look at the voodoo, BABA still has yet to make it back to the top of Elliot Wave 1 at $100. I traded some call option and sold a put spread this past week (Carter would be proud) and had one of my best option trades of the year. As for now, I have no position, but I expect BABA has some further upside at a minimum up to the top of Wave 1 at $100.  A pullback to the breakout point at $90 would provide a good opportunity for re-entry.

Have a great memorial day holiday and a great week ahead.