I wrote a piece a few weeks ago on how Yahoo, which owns 22% of Alibaba gave private traders a chance to be on the existing owners’ side of a major IPO. This was a welcome chance to change from our normal role as the ones the shares are being sold to.
At the time Yahoo was poised to make a bullish break out of a trading range which it did, with so far happy results.
So what now? On the plus side, Yahoo looks like pocketing about $8bn after tax from the IPO and will still own 16% of Alibaba. About half the Alibaba IPO proceeds will be returned to Yahoo shareholders. But the questions now are: Will the value of the rest of Yahoo’s Alibaba investment improve or decline after the float? And: Will Yahoo invest the other $4bn proceeds wisely?
Bollinger Bands might give short term traders some help in deciding whether to sell or to stay with Yahoo looking for an ongoing uptrend. Any trend peak under the upper band would be a sign of weakness here. It would suggest indecision compared to the high momentum rally we've just seen where price crawled along the upper band. If there is a peak under the upper band, it might be time for short term traders to take the money. It may also pay those interested in trading Alibaba to keep an eye on the Yahoo chart as well, either for guidance on what the market thinks of Alibaba’s price or as an alternative trading stock