Tuesday morning’s hotly anticipated Alibaba Group Holding Ltd (BABA) earnings report sent Alibaba stock more than 4% higher yesterday. With reported earnings of 45 cents per share on $2.74 billion in revenue, the Chinese e-commerce company lived up to Wall Street’s expectations in its first major test as a public company.
Thanks to yesterday’s gains, Alibaba is now up roughly 15% since its mid-September IPO. And from a technical perspective, BABA stock looks stellar.
Alibaba’s recent ascent from the post-IPO base between $85 and $95 has continued virtually uninterrupted, and Tuesday’s rally into uncharted territory is no doubt bolstering the bulls’ resolve.
Further buttressing the bullish argument on BABA stock are the recent volume patterns. The past month has seen no less than nine above-average volume days, eight of which occurred during up days.
This one-sided onslaught of high-volume up days indicates unrelenting institutional buying. Provided major selling pressure remains absent in Alibaba stock, the future looks bright.
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With year-end approaching and performance chasing returning, perhaps those who have missed out on the BABA stock gravy train will be tempted to jump aboard, further propelling its uptrend.
How to Trade Alibaba Stock
Options enthusiasts have a number of ways to play the stock going forward. One of the more attractive spreads to consider is a December bull call spread, with the potential to double your money just in time for Christmas.
The Dec $105-$110 bull call spread can be entered by buying the Dec $105 call and selling the Dec $110 call for a net debit of $1.80.
The max loss is limited to the initial cost of $180 and will be incurred if Alibaba stock sits below $105 at Dec expiration. The max gain is limited to the distance between the strikes minus the net debit, or $3.20.
To capture the impressive 163% gain, BABA stock only needs to rise another 6% to $110.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
