BABA at Key Support

BABA Weekly

 There have been a whole lot of eyes on BABA lately and on the move to new all-time highs in early-June. I've been hearing many bullish calls for higher prices, breakouts, etc. I don't disagree with this thinking but just likely on a different path than most who were making those calls. 

BABA has gone on a beautiful run over the last 2-months, rallying 8 straight weeks from the range lows to new highs. These kind of strong and persistent moves tend to attract a lot of attention, especially near the end of the near-term run. 

There will no doubt be talk today of a "failed breakout" due to the drop it made off the highs. However I feel this is EXACTLY what is needed before prices can resume higher in any meaningful way. The market loves to fool the majority and will most often shake out the bullish excess of a recent rally before resuming back higher. 

What I have had in mind for a more preferable setup vs just buying into the extended run was for a pullback to occur on the weekly chart that breaks back below the prior highs. Today we are getting exactly that. 

The Weekly chart above is now showing a textbook pullback or Bull Flag to the rising 20 Week SMA as well as filling the open gap from 5/4; this is my bread-and-butter setup. 

The confluence of support on the larger timeframe in my view overrides any "false breakout" on the Daily chart. I always yield to the higher timeframe structure and in this case the difference between the shorter-term and longer-term bias is quite pronounced. 

The fact that most short-term traders are now bearish is a good sign for the longevity of the larger timeframe trade. 

As of now this is just the initial pullback or the setup; the price action has not confirmed a verified pivot yet. For me that means buying only a partial position here on the support and then waiting for a rotation up on the Weekly chart. This will likely take a week or two to develop further.  

Trannies Ready to Show Their Stuff

The Transportation stocks are lining up on multiple timeframes to make a new leg higher it would appear. As market participants we know that a strong economy and by extension, a strong stock market should see shippers and carriers performing well. 

If Train and Freight companies are delivering products in high quantity, it means companies that sell those products are seeing high demand from consumers spending discretionary income. All combine to suggest a strong underlying demand for goods and services we need or want for our daily lives.  

It is my view that the Transport stocks are on the cusp of extending their rally significantly in the near future.  

Monthly

The long-term view of IYT has the look of an orderly consolidation after strong 2016 and 2017 rallies. Price extended up to the 161.8% Fibonacci level of the 2015 bear market decline and has since moved sideways to let the 20 Month SMA catch up to price.

Should we see a resumption of trend above the $200 level, the next extension area sits near $250+.

Weekly

The Weekly chart shows price holding firm in a range just above a multi-month resistance area. This is setting up a 3x Weekly High breakout potential should we see price move through the $198 level.

A breakout here brings the prior highs into play quickly

Daily

The Daily chart zooms in on the 4-month trading range. Note the gap resistance from late-February right near $198. This resistance has contained prices the entire time, but the behavior of the near-term action is changing.

There have been multiple tests of the higher end of the range. Those rally attempts were all rejected sharply and prices moved back to the support lows. Since the end of May sellers have not been able to reject prices as they did previously, this to me shows a strength.

It appears the sellers are wearing out and an upside resolution is imminent.   

A couple names we hold in our Model Portfolios at zentrendstrading.com are UNP and ODFL.

Note that these leading names in the Transport group have already broken through their resistance and retested the area as support. Prices are now responding higher off of that retest.

UNP

ODFL

We must always remember that a Sector or Index is not an entity on its own, but rather a group of individual underlying stocks. If these stocks are breaking out and leading the group higher, the odds increase that the Sector or Index will follow closely behind.

If you have interest in learning how to identify and manage this kind of multi-timeframe investing, please visit us as zentrendstrading.com.

We provide detailed Notes, Videos, and ongoing dialogue for our positions allowing members to follow along with our trades. Our process is designed to take advantage of large swings that occur in the market without having to sit in front of your computer all day long. 

For questions or comments please contact me at cody@zentrendstrading.com or on Stocktwits/Twitter @ZenTrends

Biotech Perking up on Multiple Timeframes

IBB Monthly

IBB has rotated up on the Monthly chart for May. We saw price come down and test key support but then managed to recover and close above the April high. This sets up an easy risk/reward using the key support at May's low as a stop

Weekly

To follow up the Monthly Bull signal, the Weekly chart confirmed an Outside/Up rotation. This also managed to move to new 10-week highs, which is a significant short-term momentum signal. This can be a more tactical trade using this week's low as the risk reference point. Substantial upside exists from these two combined timeframes.

Daily

Zooming in on the Daily chart we can see these recent tests of the $100 level and then the clean breakout over the last 2-months highs.

XBI looks even stronger but the patterns in IBB are a little cleaner in my view.

XBI finished May at the highest Monthly close ever

Our portfolios are currently long ILMN, RGEN, JAZZ

ILMN

RGEN

JAZZ