All About the Benjamin
Both Alibaba Group Holding Ltd. (NYSE: BABA) and Zillow Inc. (NASDAQ: Z) report earnings this week, and for both stocks, it's all about the Benjamin.
The $100 price level has been an area of contention for the bears and bulls in these stocks; both sides have fought it out at this critical juncture and the outcomes have differed for each security.
As we can see in the chart below, for BABA the $100 level is acting as a resistance area. Although the bulls were able to push the stock above $100 for the first time on 10/28, following the 10/21 breakout above $90, they have failed to close BABA above $100. BABA finished the month of October at $98.60 a share, its highest weekly close since its September IPO.
Likely support levels for BABA on any pullback prior to or after the highly anticipated earnings release on Tuesday 11/4 would be at $97, $94, and $90. Notice that the stock has not closed below $97 since the 10/27 open at that price last Monday; $94 corresponds to near the stock's closing price of $93.89 on 9/19, its first day as a publicly traded company.
Traders should keep in mind that the bears and the bulls have both taken hefty bets on the outcome of BABA's third quarter earnings results. The move up or down in the stock may very well be significant. For options traders that are neutral on direction but confident in a major move either way, an at the money straddle position may be something to consider exploring.
In the case of Z, the $100 level is serving as a key triple digit psychological support area following several attempted pullbacks below it in recent weeks. The low on 10/13 was $100; although the bears were able to pull the stock back to the low $98s on 10/15 and 10/30, the bulls ultimately supported the price and Z closed above $100 on both days.
The RSI is creeping up, so the near-term momentum appears to be in favor of the bulls since the bears have thus far failed to close Z below $100. The next battle may be at the 200 day MA, currently at $111.76. A close above this level would be especially bullish, as it has served as overhead resistance.
Should Z bulls overcome the 200 day MA, the next resistance level could likely be the 50 day MA, currently at just over $121. Zillow Inc. is expected to announce third quarter earnings after the market close on Wednesday 11/5.