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Posts Tagged ‘BABA’

Will Alibaba (BABA) Continue The Upward Momentum?

Monday, September 18th, 2017

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our portfolios to identify stocks that have displayed strong upward momentum and place spreads that profit it the momentum continues for about six weeks.

Last week, the 10 Terry’s Tips portfolios enjoyed another banner week. While SPY rose 1.1%, all 10 portfolios gained an average of 6.9% and are now up 75% for the year to date.  Isn’t it time you took a look at how we are doing this?  You just might learn something new.

Terry

Will Alibaba (BABA) Continue The Upward Momentum?

Some well-known analysts are quite bullish Alibaba stock and outline why they expect further upside here – Why Druckenmiller Is Optimistic about Chinese Consumer Stocks and Why Goldman Sachs is Optimistic about Alibaba.

BABA has been trending higher since late 2015 with a boost in upside momentum since the start of the year.  The stock gapped higher following the last earnings report and recently broke to record highs without closing the gap.  The 20-day moving average has held the stock higher since the middle of August and offers strong downside support as it resides within proximity of last month’s close of 172.47

BABA Chart September 2017

BABA Chart September 2017

*source Tradingview.com

If you agree there’s further upside ahead for Alibaba, consider this trade which is a bet that the stock will continue to advance at least a little over the next six weeks.

Buy To Open BABA 27Oct17 175 Puts (BABA171027P175)
Sell To Open BABA 27Oct17 177.5 Puts (BABA171027P177.5) for a credit of $0.75 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when BABA was trading near $177.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $73 and your broker would charge a $250 maintenance fee, making your investment $177 ($250 – $73).  If BABA closes at any price above $177.50 on October 27, 2017, both options would expire worthless, and your return on the spread would be 41% (357% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates September 15, 2017

IBD Underlying Updates September 15, 2017

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Is Alibaba (BABA) Ready to Accelerate Higher?

Wednesday, June 21st, 2017

This week we are featuring an option trading idea based on a stock on the IBD Top 50 List that just delivered robust earnings guidance.  We have added this spread to the Terry’s Tips  portfolio which trades vertical credit put spreads on selected IBD Top 50 companies (this portfolio has gained 77% so far in 2017).

Terry

Is Alibaba (BABA) Ready to Accelerate Higher?

Alibaba, broke out to fresh all-time highs last week following better than expected financial results both on the top and bottom line.  Prices have been forming a bull flag pattern which is a pause that refreshes higher.

If you concur with the views expressed by these analysts, consider making this trade which is a bet that BABA will continue to advance (or at least not decline very much) over the next five weeks:

What impressed investors even more than the company’s financial result, was the company’s forward guidance. The Chinese e-commerce giant estimates that revenue will increase almost 50% in the 2018 fiscal year. Analysts had previously estimated a revenue increase of about 35%. In the wake of this news, the average price target was raised to $160 with the highest at $190.

Technicals

After a round of profit taking the stock should resume its climb.  The stock price has not closed below its 10-day moving average since February.  One way to bet on a further climb would be to put on a bull put credit spread where the short strike was below the 20-day moving average.  Support is seen near the 10-day moving average at $136.92.

 

BABA Chart June 2017

*source Stockcharts.com

Buy To Open BABA 21Jul17 133 puts (BABA170728P133)
Sell To Open BABA 21Jul17 136 puts (BABA170728P136) for a credit of $1.12 (selling a vertical)

This price was $0.03 less than the mid-point of the option spread when BABA was trading slightly above $139.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $2 per contract (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $110 and your broker would charge a $300 maintenance fee, making your investment $190 ($300 – $110).  If BABA closes at any price above $136 on July 28, 2017, both options would expire worthless, and your return on the spread would be 58% (603% annualized).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

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Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins