The market continues to trade in an erratic and volatile fashion as key support areas continue to hold the market from moving lower. In addition, many sessions have seen new all-times highs being reached over the last several weeks. This is also true of many stocks, including Alibaba Group Holding Ltd (NYSE:BABA). And today I have a trade in mind for BABA stock that depends on Wall Street holding it aloft.
What makes options great, in my opinion, is the ability to profit in any type of market, including sideways action.
BABA is often compared to other companies like Amazon.com, Inc. (NASDAQ:AMZN), and for good reason. As Joseph Hargett points out in his latest article, AMZN was the big story in the retail sector yesterday with its Prime Day. But comparing last year’s numbers, Amazon could not hold a candle to Alibaba’s sales, which were almost $18 billion for their one-day sales event.
He also pointed out that BABA stock traders purchased a big amount of call options on Tuesday, which is a bullish strategy on the stock.
It is nice to have a bullish sentiment on Alibaba, especially for the trade idea listed below, but I also like what the technicals are telling me. Take a look at the three-month daily chart below.
After gapping higher on June 8, BABA stock has pretty much traded in a range over the past month. The $145 area seems to have been keeping the stock from moving higher until Wednesday. After closing above that level on Tuesday, Wednesday’s bullish market pushed the stock even higher.
Now what I am looking at is for that previous resistance level at around $145 to now be support and keep the stock from moving lower in case it tries.
Let’s look at the trade.