Here is how I would play Alibaba Stock now

A certain group of shareholders had been severely beaten. I mean October was rough. Maybe tougher for Chinese stocks listed in the United States. I am talking about stakeholders of Alibaba (BABA). These people watched Baba as low as 17 months ago last Tuesday. You have seen the analysts covering this name. Over the past week or 10 days, TH Data Capital, Nomura, MacQuarie, Benchmark and Oppenheimer analysts have all lowered their price targets for this name, including several five-star analysts, from elsewhere.

Alibaba announced the company's second quarter results this morning. The company has far exceeded earnings forecasts. Revenues, although up 54% from the previous year, were not actually achieved by consensus. The company has also reduced its forecast for fiscal 2019 between $ 375 and $ 383 billion. It compares with what was projected at $ 395 billion, but the street did not really take its share. The title is ubiquitous since Friday morning and continues to flirt with the closing level of last night while I landed this note.

Why?

My thought is that Wall Street was expecting more from Alibaba. No more income, but more reduction in future direction. Given the obvious decline in Alibaba's domestic economic growth rate in China, and the ongoing trade dispute between the US and China, which had put additional pressure on Chinese markets … judged this direction optimistic.

Like some US companies, such as Amazon (AMZN) and Microsoft (MSFT), the growth of cloud computing is a major concern of investors. For Alibaba, this growth reached $ 825 million, 90% from one year to the next. Impressive, but the revenue engine remains e-commerce. This portion of the business generated revenues of $ 10.6 million, which is sufficient for growth of 56% and represents 85% of the total Alibaba pie. Mobile monthly active users increased by 5%, reaching 666 million against 634 million expected.

What I think

After months of suffering, this name finally broke away from a solid Pitchfork model. We suddenly saw upward changes for the MACD, the relative strength and the daily cash flow. The break was, however, halted precisely at a Fibonacci retracement of 38.2% after the sell-off from June to October. This suggests an almost complete algorithmic control of the action in this security.

Although this stinks for wholesalers, it makes the stock a bit more predictable … unless I'm wrong. Then I want you to forget this article. My idea in the issue is that there could be a Friday afternoon an attempt to get into the fork from the top. As a result, I would not buy this stock above $ 147 today, or sell it below $ 155 (50-day SMA). There is however more than one way to peel a cat. (I would never want to skin a cat, that's an expression.)

Volatility game (minimal lots)

Would you like to pay $ 120 for BABA? The stock is now trading at $ 150. Do you want to sell that name for $ 180? Alibaba will announce its profits again in February 2019. Some may call it risky, but let's take a look. A trader could ….

-Sell a sale of $ 120 in February ($ 2.95)

-Sell a $ 180 call in February ($ 2.82)

The very idea here is the premium catch that comes at a $ 5.77 credit, or in minimal lots … $ 577. Now, if the stock ends up running (he has run $ 30 in the last three months), the trader may have to buy 100 shares at $ 120 (base: $ 114.23) or sell 100 shares at $ 180. (net basis $ 185.77). Interesting idea.

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