Some of you are more interested in trend trade setups, and some of you also like to search for bargains after healthy declines. This week I'm going to help you look at a couple of names that might be worth anticipating a bottom with some specific parameters. Just because we've seen a healthy pullback in these does not mean that the rally will resume for sure. There are some things that tell me however, that it's worth an educated bet. This means that if the parameters discussed hold up, I'm good with the buy side of these names. If the same parameters are violated, I'll have to consider myself "wrong" on these setups.
Let's start with a weekly chart of Alibaba Group Holding Ltd (BABA) :
The weekly chart analysis has helped me quite a bit in the past in identify possible lows. It does not work 100% of the time, but it works often enough that it should be watched.
In the case of the weekly chart in BABA, I am seeing that the most recent declining swing of $36.95 is similar to 3 other swings on this chart. The other swings were $35.37, $37.32 and $37.86 which are very similar to the most recent decline. I have found that many swings on a particular chart are similar to other swings. This is why using the 100% projections of the prior swings will often identify an area of support or resistance (of course, depending on the direction you are coming from).
In this case, the projections identified potential support which is so far holding up. There were also a few other Fibonacci price relationships that overlapped these 100% projections. The support levels are labeled on the weekly chart above.
Now if this support holds up, I'm looking for at least a tradable corrective rally and possibly more, with the ultimate target off that area coming in at the $221 area. There is also an important timing factor on the weekly chart. The last major decline lasted nine weeks and the most recent decline also lasted nine weeks into the recent low.
On the daily chart, I also have daily timing cycles that are supportive of a possible low:
You can see the Fibonacci cycles illustrated by the pink time histogram below the chart. Bottom line, I'm looking at taking buy signals in this name as long as price continues to hold above the key weekly support. If this same support is violated, I will consider myself wrong on this setup and back off the buy side until further notice.
I have one other chart I want to share, which is the weekly chart of Twitter (TWTR) :
This name is starting to test some key weekly support. I'm not going to give you a lengthy case for this one. I just want to share the two standout support decisions I'm looking for buy triggers against.
The first zone comes in at $29.65-$31.12. The second zone comes in at $26.04-$27.94. I'll back off the buy side in this also if we are unable to hold these key supports!
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