Option Traders Spot 4 Trades in $BABA

Last week we discussed analysis in Alibaba ($BABA) as potential candidate for an option trade, but the following week gave us much more!

The core principle to trading in Lighthouse Point Option is watching for change in momentum.

We discussed the stock and how it has been moving around its support levels and the 50 day moving average.

Our ideal trade is when the stock is breaking a level with momentum and the market is moving in the same direction.

Over the course of the last week, $BABA gave 4 great chances to play along with the market as it moved through key levels.

In the chart below we have highlighted the trades one through four.

1. With the market up, we expected the stock to bounce off of our key price level… stock got above the previous day high and locked in profit.
2. Along with a big gap down, then stock broke the 50 day SMA and proceeded to the 100 day to lock in profit.
3. The stock opened slightly above the 100 day SMA, then ran to test the 50 day and failed, it then proceeded to break the 100 and trade another $3 lower to lock in profit
4. The big gap up gave us an opportunity as the market was crashing to play the downside as it broke the 50 and 100 day SMAs to lock in profit.

If you get comfortable with playing momentum and you know what the stock can do and when to jump in, then option trading can be very lucrative!

Try out the Lighthouse Point Option Trading Service!