The Alibaba Bonanza Revisited

The only reason I’m doing this post is because “somebody’s gotta do it”.

It’s not about “keeping them honest” or calling anyone out – it’s about the mind-numbing orgy of overkill that frequently arises from time to time on CNBC. “The Alibaba Bonanza” took it to a whole new level.

One of the inspirations for this post if the fact that all of a sudden, CNBC has removed the dates from their video search, making it very difficult to go back in time and “see what was said”. As a matter of fact, if you go to CNBC and search by ticker symbol you won’t find the videos below at all.

They have been buried in time and I had to manually click back 34 pages to find them.. Why does CNBC make it so hard to go back a couple weeks and “review the tape?”. I’m not sure – but I have a few guesses.

With that said, I wanted to document the “Alibaba Bonanza” here so we can see how it turns out. It just seems like they tried so hard to “sell it to you”. For two whole days, there was story after story about Alibaba and the Chinese Singles Day. They literally beat us over the head with it.

Here’s a sample of some of the video segments presented during “The Alibaba Bonanza” Nov 10-11th.

Yes, by the end of day-1 we were all getting sick of it, but I have to say that I was looking forward to the Jack Ma interview. I wasn’t disappointed. Jack Ma is a very interesting and inspiring individual and every time I’ve heard him speak I’ve been impressed. I have nothing but good things to say about Jack Ma.

But the main point of this post is found in the video below.

Take four minutes and watch it – so you can see how “impressed” all these traders were with BABA – the stock.

In case you missed it, Pete N. said “it’s going to $150″.

Keep in mind that the price of BABA during this segment was $117. As I was watching the BABA lovefest I made a note of the price.

You can see the $150 price target on this image.

I must have missed the part where everyone provided a stop-loss point “in case it doesn’t work out”. I mean what kind of trader doesn’t use stops?

One of the most startling segments of the BABA-fest was Mr. Steve Liesman’s segment. He sounds pretty bullish to me, because after all – “It’s an Alibaba World”.

The point I’m trying to make here is that it just seemed like CNBC was trying their hardest to “sell it to you”. Right near the peak I might add. It’s like they were trying to convince us to buy the stock right here right now.

How has BABA done for the new shareholders that jumped on board based on the recommendation from the “channel that’s first in business”?

Well, so far they’ve done a pretty good job of nailing the highs.

Hey, I’m sure BABA is a great company and a great stock and this is just an ordinary pullback. Heck, it actually looks good for a trade over today’s high.

Perhaps it’s just “resting” and testing the 20-day moving average before the ascent to $150.

But damn, “they” sure did a great job of pushing it at the near-term highs.

But those of us that pay attention to this sort of thing know – it wouldn’t be the first time. From my experience, when CNBC goes “full bulltard” on something, you can bet it’s near a short-term top.

I’m sure they’ll be fine. After all “they are long-term investors”.

IWM Heikin-Ashi Chart Says Caution

I don’t know if you use Heikin-Ashi charts, but I do.

It gives a different view of things and helps identify changes in trend.

We know the SPX keeps chugging along, but the Russell 2000 (IWM) has been telling me to be cautious for a couple days now.

The chart above is a zoomed-in view but if you change your chart to a Heikin-Ashi and zoom out further, you might see how the view is useful at spotting changes in trend in the IWM.

Basically when the trend is up you see a series of green bars. There’s usually a point where you get some dojis or narrow-body candles and then either a resumption of the trend or a change in trend.

The size of the bodies is an important aspect to interpreting these charts.

When you have a massive run-up like we just had in the IWM +14% and then you start to see red candles with large bodies – it’s time to get cautious.

I’ve found the Heikin-Ashi chart to be very useful in eliminating the noise on traditional charts. It’s taken me quite a bit of time and effort learning to read these charts, but I can say that I find them very useful and I always check them “for confirmation”.

The most useful aspect to me is helping identify a change in trend on a stock or index.