Is BABA a buy at 95??

Alibaba  (BABA)

At the beginning of the month I began to notice that BABA spent most of its time between $87 and $90.  That was comforting since I think BABA will be a good investment.  But I am the guy who always reminds my readers to, "Trade What You See... Not What You Think, or Feel, or Hope, or...".  So in order to follow my own guidelines, I had to begin to evaluate the "risk" as BABA dropped below that $87 area.  If you read my note on the graph you will see my rationale.

 

This is a DAILY chart of Alibaba



Click for a larger chart of BABA



The gist of my thought process is that BABA came public at $68 (IPO price) and jumped into the $90's on the first day.  When it didn't continue higher I figured consolidation is better than going down.   But as it trended lower I needed justification to stay positive.  My justification is typically technical analysis of some sort.  And notice I said, "stay positive" and not stay long.  I do my best not to be long a stock that is trending lower on the daily.

In this instance I looked to Fibonacci Retracement as my justification.  I couldn't draw the Fib lines on the chart because BABA never actually traded at $68.  So after some simple mathematics I realized that the 38.2% retracement line was between $83 & $84.  A stock that bounces off the 38.2% retracement is typically a strong stock.  So stay positive as long as it bounces around $83.

You can also notice the red downtrend line on the graph from 10/9 to 10/15.  On 10/15 BABA's daily candle closed above the red downtrend line.  That is one sign that it may be time to "go long".  The next sign was when BABA's price crossed above the daily high from 10/15. 

If you did buy on 10/16, how could you have protected yourself from a false breakout?  You could have used the 10/16 low of about $84.  Anyone who did this is still in the stock today. 

So what now?  Do you buy in here?  Wait for a dip?  Buy puts or short (it's the title of another one of my posts) because "it has to come down"?  Some people actually trade like that... 

Take a look at an hourly chart of BABA.  The price has been above the 21 hour ema since 10/16.  Much of that time the price has actually been above the 8 hour ema.  If you want to buy in here, I would do it on a bounce off the 8 or 21 hour ema.  If you want to wait for a dip, I'd say look for a dip to a horizontal line where resistance became support.  And if you want to buy puts or short, you should wait for a break below the uptrend line that started back on 10/15.  Your target could be the $85ish area.

Whatever your decision, good luck to you!  Decide what you see in the chart and invest accordingly.  Use a stop loss so you don't loose too much money if you are wrong.  No one is perfect.  If you get out of an investment because you made a mistake, you can always come back and try again another time.  But if you don't get out of the investment you may not have any money left to try again.

Trade What You See... Not What You Think, or Feel, or Hope, or...

The Trend Is Your Friend...  Until Its Not

Limit Risk & Protect Profits

 

Quick Post on YAHOO! ($YHOO)

Everyone is talking about YHOO & AAPL this week.  As you may have noticed, my last couple of posts have focused on the trend lines in weekly charts.  For a change, here is a quick post on an hourly chart of YHOO.

YAHOO!  (YHOO)

Here is an HOURLY chart of YAHOO!



Click the chart for a larger chart of YHOO



• Remember this is only an hourly chart.  Why would I repeat myself?  Because an hourly chart gives very short term signals that may not last very long.  But the trend lines look the same on short term charts and long term charts.  Just remember where your signal came from and you will be ok.

• Inside the shaded box - Notice that YHOO crossed above the red DT line yesterday afternoon.  The opening candle of today tested the red DT line but didn't break it.  That was a good indication that it could be bought.  Small size initial position was prudent.  The opening candle high of today also matched the top of a candle from yesterday afternoon.  So that tells us there is some resistance at $43ish.

• UT 1 has been a good trend for a week now.  I like it as my "line in the sand".  But it is interesting to note that, after yesterday's low, UT 2 began to take shape.  It is well defined at this point and can be used as a "tight stop". 

• Although these are short term signals only to be used for short term trades.  If you want to try one you could go long close to but above UT 2 and use UT 1 or UT 2 as your stop.  If the trade doesn't work out just get out of the way.  If it does work out, you may have a descent winner on your hands.

• Things to look for...  There is resistance at $43ish so expect some turbulence there.  The price of YHOO has to stay above UT 1 to stay in the trade.  Once YHOO gets above $43, I would expect it to go to $44ish.  There may be some turbulence there too as it would match the high from a couple days ago.

Trade What You See...  Not what you think, or feel, or hope, or ...

The Trend Is Your Friend... Until Its Not

Protect Profits & Limit Risk

Twitter, JC Penny, Facebook, El Pollo Loco

Twitter  (TWTR)

 

This is a DAILY chart of Twitter

Click chart above for a larger chart of TWTR

Twitter recently reported pretty good earnings.  How good is evidenced by the jump in the stock's price and the increased volume for a couple days.  Problem is investors like stocks that "Gap & Go".  Twitter didn't.  Twitter gave investors 5 straight down days after the gap up.  Then a few days of basing.  And now we have had 4 straight up days. 

So what is next?  I would say that twitter has given a couple reasons to be optimistic. 

If you look back to July 1, TWTR put in an intraday high of $42.95.  After the earnings gap up, when TWTR was dropping and basing, we never saw a daily closing price less than $42.95.  All I am saying is resistance of about $43 prior to earning became support after earnings. 

If you look at the 8, 21, & 50 day ema's you will notice they are in the right order and the price is above the 8 day for the last 4 days.  Moving averages are a powerful tool.  As long as TWTR continues to close above the 21 day ema, stick with your long. 

The next interesting level for this stock is $50ish.  That is the high of the first say of trading. 

JC Penny  (JCP)

 

This is the DAILY chart of JCP

Click chart above for larger chart of JCP

JC Penny reported earning on Thursday after the close.  So Friday's candle is the market's reaction to JCP's pretty good earnings...  I am beginning to wonder if investors will ever believe, and give credit for, the apparent turn around happening at JCP. 

JCP went through an accelerated downtrend for about 2 years.  That downtrend was broken in March of this year.  Since the break of the uptrend, JCP stock has traded in a fairly tight upward sloping channel.  The bottom of the channel is about $8.75.  So if you want to start a long position I would advise using the bottom of the channel as your stop.  If you still believe JCP is a short, let the short trade trigger by breaking below the bottom of the channel. 

A quick word about the moving averages.  The 50 week ema is above both the 8 & 21.  If this stock is going to continue upward, then the 8 & 21 must cross above the 50 week.  Once that happens more people will jump into JCP or change their mind about JCP.  But that is long term since we are talking about weekly moving averages.  If you look at the daily moving averages, JCP seems to be riding the 21 day ema with its intraday lows.  Notice that the daily closes are at or above the 8 day ema for 7 days now.

Facebook  (FB)

 

This is a DAILY chart of FB

Click chart above for larger chart of FB


Facebook recently reported pretty good earnings.  How good is evidenced by the jump in the stock's price and the increased volume for a couple days.  Problem is investors like stocks that "Gap & Go".  Facebook didn't.  Facebook gave investors 6 down days after the gap up.  Then a few days of basing.  And now we have had a few up days. 

So what is next?  I would say that Facebook has given a couple reasons to be optimistic. 

If you look back to March of this year, FB put in an intraday high of about $72.  After the earnings gap up, when FB was dropping and basing, it came right back to that $72ish level.  All I am saying is resistance of about $72 prior to earning became support after earnings. 

If you look at the 8, 21, & 50 day ema's you will notice they are in the right order and the price is riding the 8 day.  Moving averages are a powerful tool.  As long as FB continues to close above the 21 day ema, stick with your long. 

The next interesting level for this stock is "higher".  FB is trading in uncharted waters now.  It is higher than it has ever been except for the intraday high of $76.74 after earnings.  Once it closes above that level just keep an eye on trends, higher lows, and moving averages.

For those of you who noticed, yes I just copied & pasted from TWTR to write this about FB.  That says a couple things.  One, FB & TWTR are trading very similarly at the moment.  So if one is a good investment then so it the other.  Two, don't reinvent the wheel if you don't have to. 

El Pollo Loco  (LOCO)  -  How loco are you ??

 

This is an HOURLY chart of LOCO

Click chart for a larger chart of LOCO

You did read that this is an HOURLY chart right?  This is an IPO with little price history.  I chose to post an hourly chart because it "feels" like we are looking at more history.  OK.  Now that we are all on the same page...

LOCO had a few great days out of the gate.  But then the novelty began to fade away.  There was a quick drop then a quick rise (to a lower level).  Then a semi steady decline that brings us to today. 

I will point out that the last two days have conformed to an uptrend line.  It may look significant on this hourly chart but it's only two days...  With that said, if the price stays above the trend, a long position is relatively safe.  But if the price falls below the uptrend line, get out of the way.  Just as a reference point, the opening day saw prices in the mid 20's.

Let's look at the moving averages.  Notice that they are opposite of  the right order.  They are upside down.  The 8 is under the 21 and the 21 in under the 50.  Although I love the chicken & pinto beans at El Pollo, I do not like LOCO at this point in time. Give me a couple days.  If the downtrend is broken I may change my mind. 

Here are a couple price levels I think are interesting:
$29ish - LOCO has pulled back to here twice on the hourly chart.  I would say this is a pretty strong level of support.
$31.25ish - This is where LOCO pulled back to just before starting the most current 2day uptrend. 
$33.75ish - This is where LOCO pulled back to after its initial run up.  At this point, $33.75ish is a place where LOCO could find resistance and turn back down.  But $33.75ish is also a level that could be descent support after LOCO closes above it.

Thanks for taking the time to read this post

 

Trade What You See - Not What You Think, or Feel, or Hope, or ...

 

The Trend Is Your Friend Until Its Not, Use Support & Resistance Levels,  Limit risk