BABA Bullish Shark Pattern Before ER 2018-08-12
Background from CML
Combining Technicals With the One-Week Pre-earnings Momentum in Alibaba Group Holding Limited.
There is a bullish momentum pattern in Alibaba Group Holding Limited (NYSE:BABA) stock 7 calendar days before earnings, and we can capture that phenomenon explicitly by looking at returns in the option market and looking at a simple technical indicator.
For the last year, this pattern has been particularly strong, which we will see explicitly at the end of this dossier, and roughly in the chart. But, what we can see in the chart below that BABA has been above its 200-day moving average (200-DMA) for a long time (that black curve), and it is now below it.
It is a reasonable extra condition for application to only enter this back-test if the stock is trading above that black curve (200-DMA), and if not, to ignore at, put a pin in it for next quarter, and move on. (I think this BABA should go back 200 MA anyway,so, I will take some risk next week)
We will examine the outcome of getting long a two-week slightly out of the money call option (40 delta) in Alibaba Group Holding Limited 7-days before earnings (using calendar days) and selling the call before the earnings announcement.
The BABA IV rank is high 73%, Hope next Week BABA can retest aroung 176 and reduce the premium a little bit.
The BABA option, I would try
2018 Aug 24 185C (delta=0.4), Aug 24 190C (delta = 0.28) for ER or 2018 Aug17 185C for DT only.
Based on stattistics, We should buy the option 7 days before ER. (Next Monday or Tuesday)
Combining Technicals With the One-Week Pre-earnings Momentum in Alibaba Group Holding Limited.
There is a bullish momentum pattern in Alibaba Group Holding Limited (NYSE:BABA) stock 7 calendar days before earnings, and we can capture that phenomenon explicitly by looking at returns in the option market and looking at a simple technical indicator.
For the last year, this pattern has been particularly strong, which we will see explicitly at the end of this dossier, and roughly in the chart. But, what we can see in the chart below that BABA has been above its 200-day moving average (200-DMA) for a long time (that black curve), and it is now below it.
It is a reasonable extra condition for application to only enter this back-test if the stock is trading above that black curve (200-DMA), and if not, to ignore at, put a pin in it for next quarter, and move on. (I think this BABA should go back 200 MA anyway,so, I will take some risk next week)
We will examine the outcome of getting long a two-week slightly out of the money call option (40 delta) in Alibaba Group Holding Limited 7-days before earnings (using calendar days) and selling the call before the earnings announcement.
The BABA IV rank is high 73%, Hope next Week BABA can retest aroung 176 and reduce the premium a little bit.
The BABA option, I would try
2018 Aug 24 185C (delta=0.4), Aug 24 190C (delta = 0.28) for ER or 2018 Aug17 185C for DT only.
Based on stattistics, We should buy the option 7 days before ER. (Next Monday or Tuesday)
Comment:
BABA reach the bottom around 165 - 166,can try small position for long. This point was tested on 05 December 2017,04 April 2018 and 25 April 2018
Comment:
D point finally is 165.55. out of box(But close price is inside the box)
I have 1 BABA 0824 180C sold 3.83 from 2.12(5.15 is the high in that day). good entry point, but, just 1 contract. this one can try 6000 USD.
currently, buy entry: 175-176
TP: 181.87,185.76,194.59
I have 1 BABA 0824 180C sold 3.83 from 2.12(5.15 is the high in that day). good entry point, but, just 1 contract. this one can try 6000 USD.
currently, buy entry: 175-176
TP: 181.87,185.76,194.59
Comment:
BABA today high is 179.67. Close to previous strong resistance 179-180. BABA has huge fad since last Monday.
For Option, 180C 0824 high is 4.85 and yesterday high is 5.15. So, the time decay influence the call price(Call did not has huge price change).
But,If I bot back from last night close (3.7) I still make some money today.
For Option, 180C 0824 high is 4.85 and yesterday high is 5.15. So, the time decay influence the call price(Call did not has huge price change).
But,If I bot back from last night close (3.7) I still make some money today.
Comment:
From 2018-08-13 to 2018-08-24.
Low: 165.39 to high 179.67 (pre ER) and (High is 186.5 after ER)
0824 180C option from 1.5 to 6.78(after ER).
Pre ER week: from 1.5 to 5
0824 185C from 0.5 to 3.1 (pre ER), after ER (high is baba
2.83)
Low: 165.39 to high 179.67 (pre ER) and (High is 186.5 after ER)
0824 180C option from 1.5 to 6.78(after ER).
Pre ER week: from 1.5 to 5
0824 185C from 0.5 to 3.1 (pre ER), after ER (high is baba
2.83)
Comment:
Pre ER run:
BABA close to the previous trading range high area.
After ER :
BABA try to test back the previous descending triangle
BABA close to the previous trading range high area.
After ER :
BABA try to test back the previous descending triangle
Comment:
after ER test 200MA
Need the BABA consolidate before any future move.