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:
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.
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.
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.
--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.
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