BABA Trade on Jan 6, 2022 10:29 from JRockTrades: Tradervue User Stock Trades.

Big Picture

The overall market has varied from grinding higher to selling on Covid and inflation concerns on any given day. BABA has been in a very longterm downtrend as Chinese stocks have been punished particularly badly in this market.

BABA 1-Hr Chart

BABA found a short term bottom recently and news came out 2 days ago that Charlie Munger had increased his stake and since then it has moved up. It was very strong yesterday. It is looking more likely that the bottom is in, though bottoms are very hard to decisively call. Especially with BABA, which is dual listed and subject to big overnight gaps based on trading in Asian markets.

Technical Setup:

The market overall has been super in-play for the last several days. On this day BABA opened strong, but as the overall market was pulling back you could see that BABA was being dragged down. As the market started improving, BABA lagged a bit. It had moved from a low around 124 to just over 125, which is a psychological level of interest.

Reading the Tape

BABA got over 125 and I watched to see if that level would hold. It retraced briefly before rebidding. I took a position risking a move back under 125 to 124.90, so very tight stop. My goal was to take profits into the HOD and have a portion left in case BABA was going to be strong after all and trend on the day. I could see a scenario in which that would happen and over the next few days it could be back holding in the 130s.

Trade Management

As BABA held 125 and moved higher, I initially took off 40% to cover risk about 60-70 cents higher. I then took off a further 30% in the 127 area and 10% into the HOD at 128.

I then had 20% of my position remaining and I put a stop just below VWAP. This gave the trade a good amount of room to work in case it was going to trend higher on the day. It did expend a lot of energy in the move from 124 to 128. If BABA were to move higher than it shouldn't drop VWAP was my thinking. Eventually it did and stopped out my last 20% for one good trade.

Conclusions

I took an appropriate position size, found a good risk to reward entry, had a thesis that played out decently and traded this to plan. It would have been great had BABA started trending higher on the day, but otherwise what is not to like?