Friday, September 19, 2014

BABA Alibaba 2-Minute and 5-Minute Charts Largest IPO in History Begins Trading on NYSE Price Action is Explained

At 8:30 AM, US futures trade higher. S&P +5. Dow +65. Nasdaq +13. Dollar/yen 108.76. The 10-year yield relaxes to 2.61% and lower and the 2-year yield softens to 0.57%. The early buzz on the NYSE trading floor says the BABA IPO may not begin trading until one or two hours after the opening bell (the trading day begins at 9:30 AM EST).

The trading session begins with equities jumping strongly higher on the PBOC stimulus announcement last evening (more central banker easy money) and Scotland no vote. Volume is robust. The SPX trades at a new all-time high at 2019.26. The Dow prints a new all-time high at 17350.64. TRAN prints a new all-time high at 8713.27. The Nasdaq prints a new 14-1/2 year high at 4610.57.

The TRIN prints an uber multi-year low at 0.31 verifying the euphoric and ecstatic stock market sentiment. The VIX collapses to 11.52 showing a complete lack of fear in the markets. Complacency rules the markets since stocks will go up forever with unlimited central banker money. Traders are drunk off the Fed wine staggering around and raping stocks on the long side enjoying the never-ending Fed-fueled 5-1/2 year stock market rally.

The NYSE trading floor is one big party with the BABA IPO the next joyous offering on tap for the bulls. Jack Ma the CEO rockstar of Alibaba says, “I am honored and excited for the Alibaba IPO. I want out shareholders to make money.” SoftBank CEO and Alibaba Director Masayoshi Son is on the floor of the NYSE (Softbank owns about one-third of Alibaba) and says, “We will hold Alibaba as a core company and would like to own more.”

Equities remain at the highs for the first one-half hour of trading. Dollar/yen 108.87. The 10-year yield pops higher to 2.63%. The party atmosphere continues as traders await the initial pricing range for BABA. Folks are taking selfies and high-fiving each other already planning how to spend their new-found wealth. The first initial pricing indication for BABA should have occurred by now. NYSE officials say there are tens of millions wanting to buy shares. It is odd that the market makers have not at least provided a price range for BABA even if it is a wide range.

The first indication of BABA price occurs at 10:07 AM a bit later than expected and the range is set at 80 to 83. The market makers say it is too early to project when the opening print will occur. It is not surprising for an IPO of this magnitude to take an hour or more to zero in on the opening price. The 80-83 range will narrow down to a firm dollar handle then narrow down to identify the cents level as buyers and sellers are registered in the books. The funds and banks are providing strong support for the 68 price level for Alibaba and the initial expectations are that BABA will begin trading in the 80’s.

At 10:11 AM, equities remain elevated and the market tone remains optimistic and euphorically bullish. A few minutes ago, there was some anxiousness developing since an initial BABA price took a bit long to identify but traders and market participants are back on the party wagon with smiles all around and expectations high for a flawless start to the IPO’s trading. At 10:25 AM, the price range is bumped higher to 82-85 as the market makers are teasing out the sellers. If BABA prints at 90, that reflects a $222 billion market value. The pricing in the 80’s will already make BABA a larger company than FB.

At 10:32 AM, a third indication occurs with the price range bumped higher to 84-87 as the buyers are reduced from 40 million down to 28 million. The price range is jumping in three-dollar increments. BABA should be trading within about one-half hour as the range narrows. The smaller brokers are disappointed since the big boys kept most of the Alibaba allocation for themselves. Wall Street is a “big club and you ain’t in it” to paraphrase comedian George Carlin and sometimes the players in the regular big club are not even big enough to play in the top-tier big club. Traders that sold stocks early in the week to free up cash to buy Alibaba realized they would not receive an attractive entry price for BABA so they returned to the broad indexes which helped fuel yesterday’s stock rally and today’s upside joy. YHOO is up +1.2%. AMZN +2%.

At 10:44 AM, the BABA range is 86 to 88 now at a two-dollar range representing a $217 billion market cap. The market makers almost seem like they are targeting a 88.88 number since the Chinese love the 8’s as a good luck number. The 8’s would be icing on the cake for Jack Ma’s happy day. The broad indexes are retreating off the highs but remain positive on the session.

At 10:53 AM, a fifth indication sets the BABA price range at 87 to 89 but 15 million buyers continue to look for sellers so the price range keeps floating higher. The market makers say there is likely another one-half hour required to settle the price and allow BABA to begin trading. The broad indexes are leaking lower with the RUT small caps turning negative as the VIX recovers moving higher towards 12. WTIC crude oil drops under 92. Copper turns negative. Gold drops to 1217.

At 11:01 AM, the BABA pricing process continues with a new range of 88-90 with 10 million to buy. NYSE officials brag that the Alibaba pricing process is continuing smoothly and orderly. BABA CEO Jack Ma credits the NYSE with conducting a smooth process. At 11:08 AM, a seventh indication sets the BABA price at 89 to 91. Alibaba investors, traders and market participants are becoming nervous as the wait continues and the broad markets are already trading over one and one-half hours. Jack Ma is ushered off the NYSE trading floor temporarily as everyone awaits for the final opening price for BABA.

At 11:12 AM, the eighth BABA price indication is 90-91 now down to a one-dollar range. The market makers are identifying the cents range so Alibaba is very close to trading and will open between 90 and 91 at a market cap exceeding $220 billion on par with huge companies such as WMT. The tension mounts. At 11:21 AM, the ninth price indication for BABA is 91-92 so the cents level will be identified within this new one-dollar range. People are willing to buy at any price sending the stock higher. The valuation of Alibaba is becoming very rich above 90. The market makers would like to open the stock as soon as possible to leave room for an upside pop in BABA. NYSE officials say BABA should begin trading in 10 to 15 minutes.

At 11:28 AM, the tenth BABA price indication occurs at 92-93 zeroing in on 92.50. Jack Ma is returning to the trading floor so the opening for Alibaba is only minutes away. YHOO retreats from earlier gains and trades flat on the session. The Nadsaq turns negative joining the RUT. The VIX is above 12 creating selling pressure in equities and the 10-year Treasury yield is barely hanging on to 2.60%. The Dow is testing 17.3K support. At 11:42 AM EST, BABA is very close with buyers and sellers paired off at 93. The pricing process is taking longer than expected but the NYSE obviously does not want to drop the ball. Trading in Alibaba is imminent. The excitement reaches a crescendo as price zeroes in on 92.60-93.00. Here she goes. The price is frozen. “Open Sesame.”

At 11:53 AM, BABA, the largest IPO in history, begins trading with the opening print at 92.75 (the NYSE identifies 92.70 as the official opening price). Price rockets higher and is above 97 at 11:57 AM. The 98 level is hit at 11:57 AM with BABA up +45% (remember the base price is 68). Price hits 99 at 11:58 AM. Price hits 99.50 at 11:59 AM. The SPX and Dow remain a hair positive on the day while the Nasdaq and RUT indexes are negative. BABA prints a HOD at 99.68 at 12 noon (midnight time in China where Alibaba is based). The initial sellers come in and slap BABA lower to a 93 handle at 12:02 PM. BABA does not yet achieve the coveted 100 print in the opening minutes.

At 12:05 PM, BABA price drops to back kiss the opening price level. Boom. At 12:06 PM, price drops under the opening price at 92.75. BABA is trying to establish the 92 level as support. 100 million shares are traded within the first 10 minutes. The SPX turns negative joining the COMPQ and RUT. The Dow drops under 17.3K. Dollar/yen 108.97. The 10-year yield drops to 2.59%. The VIX climbs higher to 12.28 creating additional broad market selling pressure. Trannies turn negative. YHOO is tanking -2.7% now nearly a -5% turnaround off the intraday top.

At 12:13 PM, BABA holds the 92 support and stabilizes through 92-94. At 12:17 PM, BABA prints at the opening price at 92.60-92.75 deciding to bounce or die. The NYSE takes a bow saying that trading in BABA is orderly and all systems are fully operational. The shares traded in BABA already surpass TWTR’s entire opening day volume. At 12:23 PM, now trading for one-half hour, BABA is in a very narrow 92-93 range deciding whether to bounce or die from this support area.

Whoopsies daisies. At 12:28 PM, BABA loses the 92 support. Price loses the 91 and uses 90 as support. The yen is beaten lower sending the dollar/yen pair above 109 preventing the broad indexes from falling. At 12:38 PM, BABA prints the LOD at 90.04. The official opening print is 92.70 at 11:53 AM at 48.09 million shares. At 12:45 PM, BABA holds the 90 support level. YHOO is collapsing down -6%. The first hour of trading is complete for Alibaba at 12:53 PM with BABA using the 90 level as support. The IPO trades up +33% on its debut so far. The HOD is 99.70 and LOD 90.04. The day is young.

Note Added at 1:16 PM:  BABA falls through 90 support and prints an 89 handle with a LOD at 89.95. Price continue to fight to hold the 90 support.

Note Added 1:36 PM: BABA bounces off the 90 support and runs higher bumping up against the 92 resistance ceiling. Price is 91.27.

Note Added 2:00 PM:  BABA trades sideways supported by 90 below and resisted by 92 above. Price is 91.83 near the top of this range. The sideways 90-92 channel is key. BABA bulls win above 92. Bears win below 90. Price now at 91.98 testing 92 R so it is time to bounce or die.

Note Added 3:00 PM: Bounce. Price moves above the 92 resistance at 2:05 PM that now becomes support. Price back tests the 92.70 opening price resistance and rolls over to the downside. At 2:47 PM, whoopsies daisies. BABA loses the 92 support that now becomes resistance again. Price is 91.32. Key S/R is 92.70, 92.00 and 90.00.

Note Added 3:45 PM:  BABA breaks up through 92 and runs higher to try and punch through the 92.70 resistance. Price is 92.81. BABA wants to end the first day of trading strong and on an up note so price is pushing higher to print above the opening bell price at 92.70. The market makers will likely keep the price above 92.70 through the closing bell to avoid any embarassment.

Note Added 3:51 PM: Bingo. Price moves above 93 to 93.50.

Note Added 3:54 PM: The Alibaba magic carpet ride continues into the closing bell with price running towards 94.

Note Added 4:02 PM: Alibaba survives the first day of trading. The market genie fulfills Jack Ma's wish. BABA settles out ending the day at 93.17. The starting IPO price is 68 and the opening price is 92.70. HOD is 99.70 that occurred in the opening minutes. BABA fell 30 cents short of the 100 price level. LOD is 89.95 so BABA printed an 89 handle and the overall range is 89-100 today. BABA gains +38% on its first day of trading. YHOO tumbles nearly -3%. AMZN +2%. GOOGL +1.3%. FB +1.1%. AAPL -0.6%. BIDU -1.5%. EBAY -0.6%Alibaba is valued at over $230 billion market cap. The chart is only trading for a few hours so using technical's may seem like folly but in the 5-minute time frame a few interesting ideas surface. The BABA key S/R is 99.70, 99.0, 95.0, 94.0, 93.0, 92.70, 92.0 and 90.0. The 90 support held today. The blue lines on the 5-minute chart show a C&H (cup & handle) pattern so the base of the cup at 90 and breakout level at 92.70 targets the 95.0-95.4 area. The stochastics (overbot) are negatively diverged and content with seeing price move lower going forward and wants to create a spank down. The other indicators are long and strong (green lines) wanting to see higher highs in price after any pull back in this 5-minute time frame and the RSI has not reached overbot territory. So the projection is for a continued sideways up move likely to the 95-ish C&H target in early Monday trading. At that time the neggie d should form for the indicators to create a roll over to the downside. Remember, these are only 5-minute candlesticks so the thought is that the 95+ may print on Monday morning followed by a topping out and roll over. Price may simply stumble through 93-95 in the early going. A break up through 95.0-95.4 would send price to 99 so BABA bears will need to hold the line at 95 and BABA bulls will want to break up through 95. Bears win under 90. The Alibaba IPO is successful after its first day of trading.

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