As I’ve mentioned before, IPOs take patience. I like to wait for a new stock to shake out a bit before making a purchase. I’ve been watching Alibaba (BABA) since the IPO and haven’t built a position or made a trade because the Twitter (TWTR) and StockTwits streams haven’t been able to confirm a good entry point. I first warned about BABA in November when both Twitter and StockTwits momentum were painting a negative divergence with price.

Since that time Twitter momentum has created one potential long setup. This occurred in January when 7 day momentum started to compress in a triangle created between a confirming down trend line and a positive divergence between with  price. The triangle broke to the downside (similar to Twitter’s first attempt). This leaves us waiting for another positive divergence, preferably after an over sold reading that indicates traders and even some investors have been washed out of the stock. BABA will eventually make a durable low so subscribers should keep an eye on it over the next month or two.