The Level(s) To Watch
On one hand, BABA, has launched more than 60%, off its most recent lows.
On the other hand, that launch posted the highest daily, weekly monthly, and (about to be) quarterly volume, ever.
Markets tend to come back and test wide bar, high volume areas. Just that probability alone, coupled with the unprecedented volume behavior on four timeframes, points it to the bear side.
Shorting China FXI, via YANG, discussed yesterday (not advice, not a recommendation), is essentially a BABA short as that equity is weighted more than 10%, in the FXI.
So, let’s take a look at what BABA, is saying about itself.
BABA, Weekly Chart
The massive weekly volume highlighted below.
Next, we have a not-so good-looking picture (for the bulls).
BABA may be posting a long-term Head & Shoulders top.
Next, is the daily with its largest volume ever as well.
Getting closer-in on the daily, there are support levels to watch.
At this juncture, early in this session, we’re at support now. Breaking down puts the next, less defined support into play.
The last post, showed what was then current positioning in FXI leveraged short vehicle, YANG (not advice, not a recommendation).
During the session yesterday, the YANG position was increased substantially. Essentially, the low-risk opportunity was used to its fullest advantage.
This method of trading goes way back to Livermore, Wyckoff and Loeb
Focus on the big picture and strategy. Look for the (potential) big move.
Use what the market is saying about itself to find the danger point. The point of least risk.
Real market opportunities are rare. When one is found, it must be used to its fullest extent.
Do NOT diversify. Focus positions and time the market.
As always, anything can happen.
BABA is currently at one of its support levels and holding for now … bulls still have a chance.
Obviously, the active trade, YANG-22-01, is taking the bearish stance. The plan is to have a tight, in-the-green stop, soon (possibly today’s low).
As this post stated at the outset, we’ve got all time high volume on four timeframes: Nearly a bearish case in itself.
The high-volume area may be tested.
That means BABA (and FXI) price action would need to move lower to perform that test.
Charts by StockCharts
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
The Danger Point®, trade mark: No. 6,505,279