At the end of March we issued a buy signal for Alibaba (BABA). Since that time the stock has rallied then given up all of its gains. During the same time period momentum calculated from the Twitter stream has been mostly flat and is now falling. This isn’t the type of action I like to see on a long trade. Especially when trying to catch a bottom. As I’ve mentioned before, discipline matters when trading stocks. If you don’t have the discipline to close a failed trade at a small loss you’ll find yourself with a large number of stocks sitting in your portfolio with big losses. If you made this trade in BABA then it’s time to watch 7 day momentum. It is on the verge of breaking its new up trend line. If it does then the odds will favor another flush down for the stock before it can attempt a bottom. You’re better off closing the trade and waiting for another opportunity than you are holding and hoping the stock will rally. You can track 7 day momentum on the daily chart of BABA here.
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