There are all sorts of patterns that are ugly for stock charts, but many do not know that there is bearish stock indicators that are derived from volatility. One that is particularly bearish is the combination of sinking volatiltiy and a sinking stock at the same time. This is developing in BABA
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Stocks are struggling today to make it to another record for the S&P 500. As of right now a little push at the end of the day should do it. Without anything news worthy I don’t expect stocks to do a whole lot. A stock that has been doing a lot is BABA.
Tomorrow morning Alibaba reports earnings. The market is expecting big things because the IV is exploding. What is interesting is that the IV in Yahoo options is not. Currently BABA accounts for about 85% of YHOO's market value. Thus a pop in BABA options should produce a pop in YHOO options. But take a look at the two IV charts compared:
After the record run to all-time highs stocks are stuck today while the violence in the Ukraine continues. We have highlighted the 5% realized vol in the SPX and will not rehash that but stocks are setting up to go somewhere. A name that has been setting up to go somewhere is YHOO.
The stake in BABA has really driven the value in YHOO’s shares recently and the name has been in a range from $33 to $38. It is now at a 3 month high as BABA just released a decent earnings report as it sets to IPO.
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I am going to skip the double whammy of the VIX up, SPX up today. Chalk that up to airplanes falling out of the sky and freaking folks out, which it should. All those overseas tragedies add up when it comes to volatility. I for one would like to see them end soon.