Credit: Shutterstock photoAlibaba Group ( BABA ) was added to IBD Leaderboard in unorthodox fashion last spring, a process that teaches why it pays to keep watching good stocks even if you've passed on a breakout.
On March 13, shares topped the 104.67 buy point of a cup-with-handle base(1) . Volume was ample, which indicated that institutional investors were buying the Chinese online retailer in earnest.
But the IBD market writers evaluating Alibaba had some doubts. One reason was the relative strength line, which was lagging the stock price's progress. Besides, Alibaba had yet to show it could be a big market winner. Since its initial public offering in September 2014 - the largest IPO in history - Alibaba hadn't gained much ground from its very first week, at around 90 a share.
Fresh in the memory of Leaderboard team members was the fact they had placed Alibaba on the Leaders List as it topped an aggressive entry on Feb. 8, only to remove it on Valentine's Day when shares erased gains from that entry. So, Alibaba was not added to the Leaderboard.
Grumblings aside, there was no doubt that the company was special. Its fundamentals were improving and the company is a giant online retailer in the world's largest country. Earnings and sales growth had been accelerating, with EPS gains solidly north of 30% the prior two quarters. No wonder Alibaba has been called the Amazon.com of China.
Alibaba made slow gains from the breakout, but the tight trading created a new entry on the chart. A three-weeks-tight formation gave a new 110.55 buy point (2) , a second chance for those who passed on the March buy point. On April 10, the stock punched above 110.55. The RS line was acting better, and volume lifted 70% above average. In short, there was more confidence in the chart.
Alibaba went back into the Leaders List that day and remains in it today. That makes it one of the longest-tenured stocks on the current Leaderboard slate.
Maintaining a good distance above its 50-day moving average , the stock's advance hardly presented any challenges. Shareholders saw their profits swell June 8, after management forecast 45% to 49% sales growth this year. That was far better than analysts expected, and shares vaulted 13% (3) .
A few pullbacks after that surge resulted in an ascending base . The stock has been uneven since topping that entry (4) , which forces a careful analysis on whether to hold still. But there are no sell signals so far.
While the holding period has gone smoothly for the most part, a successful investment like this one rested on sound rules. Those rules determined that it was the right time to buy a fundamentally superior stock that, despite its prestige, had been a disappointment up to that point.
With Leaderboard, investors can get the needed guidance, as market specialists study the selected stocks and annotate charts with the latest signals. Free trials are available.
RELATED:
Alibaba-Backed Qudian IPO Soars In Debut After Pricing High
How Thor Went From Regret To Rejoice On Leaderboard
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
