Alibaba Group Holding Ltd (BABA): Distribution Trade Planning For This Stock

alibabaCorey Rosenbloom:  Is Alibaba (NYSE:BABA) setting up another Distribution Arc or Sell-Swing Breakdown Pattern?

Let’s view the prior example and plan our strategy for the current similar pattern.

At the end of 2015, Alibaba (BABA) shares formed a distribution triangle (with negative volume and momentum divergences) into the $86.00 per share level.

A gap-down OUT of the triangle set in motion a strong sell-swing (liquidation) “away from” the $86.00 level toward the prior low near $60.00 per share.

With the market, a strong positive divergence boosted shares higher – but also like the market – not quite to the prior high at the $86.00 level.

Finally, like the market, shares are forming a small Head and Shoulders Pattern or Distribution Arc on similar negative divergences.

What’s the expectation and trading plan?

By the way, if you’re not trading Alibaba (BABA), this same logic will work for other swing-trading candidates.

IF price continues to break down toward $74.00 and under the $74.00 pivot (the 200 day SMA again), THEN we’ll expect price to complete a similar liquidation/sell-swing “away from”$74.00 toward the $60.00 pivot or lower.

If so, set up a campaign of short-selling similar to what we saw in January and February 2016.

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