6/26/22 Feels like BABA’s downtrend has ended. Looks better to be short than long at current market levels.

Hi everyone, I hope you are doing well! I think BABA has finally ended its downtrend that it started years ago.

Here are a couple indications of why I think this is the case:

  1. The stock tends to gap up (more buying in Hong Kong market) and also ends the day near its highs
  2. The length of this recovery in terms of duration / time is also longer than previous bounces. Most of the previous bounces stopped after around 14 days, although many did stop around the 28 day mark (which is the current duration of this bounce)

BABA weekly chart below. Notice how much longer this recovery is compared to the other bounces.

My INTC position isn’t doing very well, but I’m not very concerned because I like the company’s growth plan and more importantly the dividend yield.

I’m starting to really like META and NFLX from a valuation standpoint, although I still like BABA more. If META were to drop to ~120, that would be roughly the same valuation as BABA is at currently. I’m still holding a cash position that is roughly 10% of my portfolio value, and won’t hesitate to deploy it if META drops significantly from current levels.

The overall US market looks a bit shaky still because we are bouncing after a short term downtrend. Although I think we have another 5% upside from current levels, it seems better to be short here (or have no position) than to be long. If I were still doing short term trading, I would short in the 300-310 range and cover in the 260-270 range with a 10-15 dollar stop loss. Risk is 10-15 with a reward of 30-50, which is a risk to reward ratio of 1:2 up to 1:5

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