Short-Term Bulls Swarm Alibaba Group Holding Limited (BABA)

Alibaba Group Holding Ltd's (BABA) rally has it testing resistance

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Published on Feb 25, 2015 at 12:49 PM
Updated on Apr 20, 2015 at 5:32 PM

Alibaba Group Holding Ltd (NYSE:BABA) has popped 2.2% this afternoon to trade at $86.54, and options traders see additional upside ahead. Specifically, more than 74,000 calls are on the tape -- representing nearly 1.5 times the typical intraday amount, and more than doubling the number of puts exchanged so far.

Short-term traders are targeting BABA's weekly 2/27 85-strike call. More than 5,400 contracts have crossed at this strike, and several signs suggest a number of positions have been bought to open. In other words, these speculators are eyeing additional upside for the shares through the end of the week, when the contracts cease trading.

BABA call buying has picked up in recent weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock's 10-day call/put volume ratio across this trio of exchanges is 2.50 -- with calls more than doubling puts. For the sake of comparison, the ratio was a more modest 1.82 two weeks ago.

Technically speaking, today's upside move stands in contrast to Alibaba Group Holding Ltd's (NYSE:BABA) longer-term trend. Since topping out at a record $120 in mid-November, the shares have skidded close to 28%. Meanwhile, BABA is currently testing resistance at its 10-day moving average, located at $86.60.


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