Trading Nation
Alibaba hit a new record intraday high on Thursday, and TradingAnalysis.com founder Todd Gordon says the stock will see even more new highs when it reports earnings next Thursday.
“The stock had been consolidating in September, October and right through the end of 2017,” he said Thursday on CNBC’s”Trading Nation.” But in 2018, markets overseas are booming, he said. “We’re seeing a nice push up.”
This breakout of consolidation leads Gordon to believe the next leg up is upon us. He also noted that the stock broke above resistance at $190, which becomes support. He establishes this as a key level to watch into earnings.
To take advantage of the rising implied volatility, or the price of options, going into Alibaba, Gordon wants to make a bullish bet on the stock by selling a put spread. Specifically, he is selling the Feb. 2 weekly 192-strike calls and buying the Feb. 2 weekly 197-strike calls for $1.95 credit. This means that if Alibaba closes above $197 on Feb. 2 expiration, then Gordon would receive the $195 credit on the trade.
If Alibaba closes below $192 on Feb. 2 expiration, Gordon could lose $304. However, because Alibaba is already trading at $198.24, above the higher put strike level in Gordon’s trade, he believes that the probability of the stock dropping by that much is small.
So far this year, Alibaba has soared about 15 percent.
Not a Scientific Survey. Results may not total 100% due to rounding.
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About
Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.
Brian Sullivan
Brian Sullivan is co-anchor of CNBC’s “Power Lunch” (M-F,1PM-3PM ET), one of the network’s longest running programs, as well as the host of the daily investing program “Trading Nation.” He is also a frequent guest on MSNBC’s “Morning Joe” and other NBC properties.
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