A Look at Alibaba on Multiple Timeframes

I find using multi-timeframe analysis helpful for identifying strong turning points. Being a long-term swing trader I want to position myself in a blooming trend early to capture large profit opportunities. The kind of moves I prefer take time to develop, they don't occur over a one or two week period. If I position correctly and the stock cooperates I may hold for a year or more.

BABA is offering the type of opportunity I look for as long-term swing trader. Not only do they sport solid growth numbers, but also a very low 33% Institutional ownership at the current time. It should be noted, according to finviz.com Institutions added 6.5% more exposure in the most recent quarter. When the Big Money are accumulating shares it is often a positive sign for future growth. BABA grew EPS by nearly 200% in the past year and posted 60% Sales Growth Q/Q.

It appears the fundamental numbers are headed in the right direction, now lets take a look at the four primary time periods I use to identify these turns:

Monthly

For my methods it all starts with the monthly view. Being that BABA is a relatively new issue stock it is only recently showing a 20 SMA, which is now turning higher. The rally this year extended in the late summer and was trading more than 40% above the 20 Month SMA. When this amount of "air" exists between price and the 20 SMA I know its time to wait for a better risk/reward and let the stock settle out for a while.

Since the $110 high in September BABA has pulled back to just above the prior breakout level near $85. This has allowed the trend to rest and has shaken out a lot of the excess bullishness as traders chased the prior rally. Much of the air has also been filled as price is now approaching the rising trend average.

Weekly

The Weekly view is where most of my signals generate from. For BABA to trigger an entry we first need to see price above the prior week's high, currently that comes in at 95.30. For a valid weekly Buy signal to confirm price will need to close above that prior week's high.

I have alerts set for 95.30 to notify me when the trend is making the "higher high" we are seeking. We will then watch how the week plays out to see if price can hold and suggest a turn is in place.

Daily

Drilling down to the Daily timeframe can give us an indication of the underlying patterns that may be forming. There are a few things that stand out to me right away. First we have a gap fill from the August breakout that also coincided with a 61.8% retracement of the summer rally. Secondly I notice the pullback has seemingly formed a very clear 5-wave pattern that may have completed after the gap fill and Golden Ratio tag.

If we remove all bias from indicators and simply look at the trends we can see it is still a bit early to determine if the trend has fully bottomed. In July price began making higher highs and bull flag type formations. This action continued until the October rally failed to break higher and instead rolled to the downside. Since that trend change price has made lower lows and steady bear flag formations.

We don't need to be in a hurry here as we still see lower highs and lower lows on all three major timeframes. But price is now approaching some interesting support and the patterns that are forming are suggestive of a healthy pullback rather than a long-term trend failure.

Hourly

  If we continue down to the intra-day action on the 1 Hour chart we can see the start of a possible trend change. But we must be careful not to get caught in a similar situation as a few weeks ago. In mid-October the price action tried to firm up and got above both a rising 20/50 SMA. Yet it failed to make a higher swing high and instead led to much more downside. This is why we really want to see the prior week's high at 95.30 taken out. That would suggest this potential low may hold and the trend could be ready to turn higher.

--The bottom line is Alibaba is giving multiple indications of more upside to come in the intermediate term once this pullback runs its course. We don't have enough evidence at this moment to plow into the stock but we could begin building a position soon if conditions suggest a low is really in place.

The first signal that the turn may be ready would be to break above the 95.30 resistance area. A move through that and I will begin to nibble at a position. Should we then see a weekly close above the prior week's high I will add more on the confirmation.

Thanks for reading
-ZT

President Trump, According to the Stock Market

So THAT happened. Whether you are pleased with the outcome or not doesn't effect our investing process. So many let politics and emotions cloud their investment decisions. That's not what we do here; we look for opportunities, we look for money rotation. There was plenty for everyone in the market this week. Some groups got brutalized and others appear to be headed to the moon. Once this honeymoon period ends things will balance out a bit, but the initial reaction is notable and we must adapt to what the market is telling us.

In full disclosure I did not vote for The Donald. Part of me really fears how this will play out with foreign policy and how many will be effected State-side. But another part of me thinks we should give him the benefit of the doubt. It is possible everything he has said over the past year + continues forward and shit really hits the fan. Its also just as possible that he becomes much more presidential and actually does a really good job of improving our economy for the dwindling middle-class.

The stock market sure voted for how it thinks this all plays out. We saw Banks indiscriminately rip higher, Transports were breaking out even before the election, industrial metals and basic materials saw big rallies, healthcare got a big relief, while safety trades, bonds, and rate sensitive groups got absolutely crushed. Heavily U.S. based Small-cap stocks dramatically outperformed as well.

Banks

My growth scans this week were absolutely over run by Regional Bank stocks. I got some of the strongest readings I've ever seen in my scan results this week and more than 70% of the opportunities where from Regional Banks. Insurers and the large institutions also saw big inflows. We've owned JPM and BRKB since August, the action hasn't blown the doors off but the relative strength while the broad market corrected was very notable.

JPM

BRKB

Warren Buffet's Bershire Hathaway would seem to hit it out of the park in a Trump market. His portfolio remains heavily weighted toward Insurance, Energy, and he owns an entire railroad company. Not to mention whatever the heck he gets out of his BAC deal, BRKB appears to be a great way to position in the newly developing environment.

I added one Regional Bank name to our growth portfolio this week, WAL

WAL

The past two weeks have seen select Transport stocks break above large consolidation bases. The strength in IYT since early October has been very apparent to me and this week we got confirmation of that behavior. See my previous post on this Transport structure here.

IYT

Those 5 tight weeks were the tell here. While the market was falling apart arguably the most economically sensitive group didn't even budge.

ODFL

FDX

ODFL and especially FDX had broken above large base resistance well ahead of the election. Once the news hit they continued to lead the way higher.

UNP appears to be lagging the group but is on the verge of a large breakout as well

UNP

Infrastructure stocks did very well also: Steel, Copper, Builders, Coal. Apparently some building is going to take place.

AKS

JJC

FCX

MLM

CLF

Healthcare, specifically Biotech got some relief from the recent rhetoric.

IBB

This still doesn't appear to be anything different than a range bound market. It sells off into the lows and spikes back up, rinse and repeat until it breaks.

Bonds and rate sensitive stocks continued to be sold. This is really not a new trend as they have hinted this way for weeks, but the move this week affirmed that prior rotation. It almost had a whiff of panic to it. Everyone trying to squeeze through the door at the same time, this is what it looks like when the dam breaks.

TLT

XLP

It is possible that this was the downside blow-off Staples and Bonds needed after such a strong run. I can count a potential 5-waves down on the weekly trend, which would suggest an intermediate term low could be in place. But we have no evidence at this point of this being a high probability, its purely hypothetical. The trend has been down since August and hasn't exactly slowed down as of yet.

Small-cap stocks saw follow-through on the recent breakout throwback

IWM

I'm not sure what all this means or if it reverses or continues, nobody does. All we can do is position with the big money; flow with the strength and avoid the weak. There were significant adjustments this week in the pricing of assets. Typically these dramatic moves have staying power.

Thanks for reading
-ZT

Caught Looking at Trannies

If this market is going to fail, like soooo many feel it will, the Transports will begin to roll over signalling a soft economy ahead. This will be a major tell for me going forward and I feel the Trannies should be on everyone's radar.

Frankly the structure looks bullish to me on the Weekly charts. IYT appears to be consolidating an initial recovery rally following the 2015 bear market.

IYT

If the Trannies breakout to the upside from this monster base its going to be pretty tough to justify a bearish outlook for the market. The 20 Week SMA is now rising and below price, cupping the pullback; often this is a bullish posture and leads to higher prices.

Drilling down into some of the individual Transport positions can give us a further hint to how this base may ultimately resolve.

The largest holding for IYT, accounting for 13% of the ETF, is FedEx (FDX) which recently reported a stronger than expected quarterly earnings report which sent the stock higher by 8% at the end of September. Since then the stock has used the last 4-weeks to consolidate those sharp gains and last week tried to resume higher from a bullish flag formation

FDX

Truckers in particular look quite strong here as they are leading the group and breaking through large base resistance levels.

ODFL

KNX

Rails which make up a decent portion of the sector are pulling back after bouncing off the recent correction lows. They are the lagging group of the IYT and should be watched closely. A positive turn here could be just what the sector needs to catapult higher.

UNP

CSX

CSX is clearly in better shape on a Relative basis compared to UNP. Which will reflect the true move? We don't know yet, but this whole group needs to be at the top of our radars going forward.

Keep your eyes pealed for Transports to either break out or break down. The next move for this sector will likely set the tone for the market overall.

Thanks for reading
-ZT