Trade Idea

With a Clear Level to Measure Risk Against

I believe one of my positions is offering a compelling risk-reward entry right now. I am putting it on your radar as an idea.

It is an AI leader trading at 17x forward earnings, with EPS expected to double over the next two years, putting it at just 12x on a two-year forward basis. Furthermore, its cloud business is accelerating.

From a technical perspective, it has pulled back to a key level: the AVWAP from its all-time high. This is a significant level where business has happened before. Buying here provides a clearly defined level to manage risk; I suggest placing a stop 1 ATR ($4.21) below the AVWAP.

Trade idea below:

BABA fundamental snap shot:

BABA chart:

My strategy would be to enter at the AVWAP 121 or above with a stop-loss set 1 ATR (~$4) below that level, meaning I would stop out if the price drops below ~$118. This represents a total risk of roughly 3% on the position. If one sizes the position at 5%, for example, and gets stopped out, the total portfolio impact is 0.15%. As a rule, I feel that the maximum loss on any single trade should not exceed 0.5%.

My initial upside target is $146 (+20%), followed by a secondary target of $155. While the average analyst price target for BABA is currently in the $188–$190 range, I prefer to take it one step at a time.

End of the war whenever that may be would be a catalyst, plus Trump is making a trip in May to China, This would be a boost for sentiment too.

Note: I already own BABA as a conviction long term investment but I noted it has come to an area where it has historically found support hence sharing the idea.

As always this is not financial advice, ensure to do your own checks and I recommend using a stop loss as per your portfolio needs.

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