I Like Pullbacks on Vipshop

 | Apr 25, 2014 | 9:00 AM EDT
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The highest probability setups are the ones that have all the key moving averages on the right side of them. That doesn't mean that other setups will not work, it just means that the odds are slightly higher when this does occur.

Actually, when we first tested the original Fibonacci price cluster zone at the $120.99-123.22 area in Vipshop Holding (VIPS), the averages were not totally on our side. At that time, price was above the 200-day simple moving average, but below the 50 SMA and the 5 EMA was below the 13. An important low was still made then on April 7 at $123.01. We also had a pretty dramatic retest of the zone after the initial rally and it did end up holding above the April 7 lows. 

Now that price is currently above both the 200 and 50 simple moving averages and the 5 EMA is clearly above the 13, the odds have increased for this setup to play out to the bigger-picture target, which comes in at the $198.05 area. Of course there are no guarantees of this, but the 1.272 extension is what we watch for as far as a target is concerned.

Vipshop Holdings (VIPS)
Source: Dynamic Trader

I like buying pullbacks in this one. I will consider myself wrong if the April 7 low is taken out. Keep in mind, you can really refine your risk by either using options strategies or by going to the lower timeframe charts to define zones where you can risk less than below the April 7 low.

What we need to see next, if the bigger-picture upside target is going to be approached, is a clearing of an important hurdle that includes the .618 retracement back to the March 4 high at the $159.47 area, which nicely overlaps a 1.272 extension of the April 9 high to the April 15 low ($157.43).  A push through this area ($157.43-159.47) is likely to bring us a bit of an acceleration to the upside in this one. Let's see if VIPS can make the push or not.

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we will add this here to cheaply protect our downside a bit BOUGHT SPY SEP 244 PUT AT 2.70 ...



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