Alibaba: Did You Buy the Dip?

That postulation became especially true when the market opened on Monday with one last shake out and re-test of the $153 level (where we bought call options). BABA subsequently rose from 153 to 174 by Tuesday morning with our call options more than tripling in less than 48 hours. (filled buy order below)

Here’s the visual

These are some of the questions our readers have asked and the answer is we sold because:

1. Anytime a position triples in value in a short amount of time it is prudent to take some chips off the table.

2. Price had reached the declining 10 day moving average (target #1)

3. Price had also reached the 38.2% Fibonacci confluence drawn from the 1st high volume sell off to Monday’s Hammer candlestick.

On the hourly time frame BABA is overbought; price actually has also slid back into the break away gap formed on Tuesday suggesting that a re-test of the most recent swing low may come to fruition. Bulls will be looking for a higher low than the one made on Monday.

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