Chinese e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA) joins the earnings fray on Friday next week. Alibaba stock has struggled in recent months due to the threat of a trade war between the U.S. and China. However, BABA stock is positioned perfectly for a bullish play ahead of earnings.

Tit-for-tat tariffs between the U.S. and China have created considerable volatility for Alibaba stock of late. In fact, the shares have maintained a rather broad trading range since November. Technically speaking, resistance has emerged in the psychologically significant $200 region, while support lies near $170.

BABA stock has been met with serious profit taking whenever the shares approach $200, while buyers dive back into the shares near $170. The pattern currently has Alibaba stock trading near the lower rail of this trading range. With earnings set to arrive next week, BABA should rocket back toward the upper rail in short order.

Click to Enlarge Growth has been the main concern for Alibaba investors. Can the company maintain its current breakneck pace of growing sales by more than 40% each quarter? The consensus seemed to believe that Alibaba would need to break into the U.S. market to maintain this pace. That is not necessarily true, but it would certainly help.

As I’ve noted before, the domestic Chinese ecommerce market is expected to grow 50% year-over-year to more than $1.5 trillion in 2018. As the largest ecommerce retailer in the country, Alibaba will capture the lion’s shares of that growth.

Looking at the current quarter, Wall Street expects earnings of 86 cents per share, up from 69 cents last year. Revenue is expected to grow a whopping 52.2% year-over-year to $9.27 billion. EarningsWhispers.com puts quarterly earnings at 92 cents per share.

Sentiment also remains widely bullish on Alibaba stock. According to data from Thomson/First Call, 47 of the 48 analysts following BABA rate the stock a buy or better. The 12-month consensus price target of $217.63 represents a healthy premium of 25.7%.

Turning to the options pits, short-term BABA options traders are leaning bullish on the stock. Currently, the May put/call open interest ratio comes in at 0.64, with calls outnumbering puts among near-term options. That said, peak call OI rests at the just overhead $175 strike, indicating restrained expectations despite the heavy bullish sentiment.

Overall, May implieds are pricing in a potential post-earnings move of about 8% for Alibaba stock. This places the upper bound at $187, while the lower bound lies at $159.

2 Trades for Alibaba Stock

Call Spread:  The recent pullback to the lower range of Alibaba stock’s trading range is a bullish development for the shares heading into earnings. Barring any Trump tweets, BABA stock should be poised to rally back to the upper end of its trading range, and potentially breakout above $200. As such, traders looking to jump on the bullish bandwagon might want to consider a May $185/$190 bull call spread.

At last check, this spread was offered at 94 cents, or $94 per pair of contracts. Breakeven lies at $185.94, while a maximum profit of $4.06, or $406 per pair of contracts — a potential return of 330% — is possible if BABA stock closes at or above $190 when May options expire.

Put Sell: If you are concerned about broad-market or Presidential tweet headwinds, then a BABA put sell may be a more neutral path toward profit. At last check, the May $160 put was bid at $2.31, or $231 per pair of contracts.

As long as Alibaba stock trades above $160 through expiration, traders pursuing this strategy will keep the $231 premium. However, if BABA trades below $160 ahead of expiration, you could be assigned 100 shares for each contract sold at a price of $160 per share.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.