Alibaba (BABA) Supply Slowdown meets Demand Shock – March 12th, 2020
S&P 500 Market Outlook: Neutral
Bearish Trade: BABA $198.91 – Cons. Discretionary
OptionsPlay’s bearish trade for Thursday, March 12th is Alibaba (BABA). BABA is part of the Cons. Discretionary Sector (XLY). XLY has declined 17.16% lower over the past month and its 1m and 6m trend turned bearish on Feb 25th and is just bounced lower off its $110 resistance level.
Alibaba’s 1m and 6m trend turned bearish on Feb 21st and recently broke below its $200 support level. With a technical score of 10 (out of 10), BABA is a strong stock that is starting to turn lower.
As a stop loss, if BABA were to trade above $200 for multiple days, this would invalidate our analysis and suggest cutting losses on the trade. We also recommend cutting losses on this options trade if the value of the vertical spread declines below $4.40.