Trader's Ask: Should I Use a Time Stop in Alibaba?

Hey Bella sorry to bother you again intraday. I’m very close to having having gotten ride of my over trading tenancies/urges and will start pulling the trigger on better trades2hold in the coming days/weeks.

BABA though, it formed a support at 112.10 – 12.15ish. When you get long. Two questions.

1.) If you got long at 112.12 do you hold BABA regardless of elapsed time (and only exit of it breaches a price level) or do you give it an allotted time limited before you exit? (assuming BABA just sits at 112.20 area and doesn’t move)

2.) If the price starts to compress and hold lower and tighter towards 112.10 do you exit the position or a few tiers prior to support being breached or do you wait for the price level to actually breach?

@MikeBellafiore

I really like the idea of a time stop. If a stock does not behave as you think it should in the time it should, then you exit. These two posts can help:

The Time Stop (an example in Yum Brands)

Is a Time Stop a Reason2Cover My Position in Green Mountain Coffee?

If a stock is holding lower and tighter towards the bottom of a range this may be a Reason2Exit as well. This may be evidence that the stock is getting weaker and ready to fail. For my trading, I would probably lighten up here but not get flat until the actual breach.

I hope that helps.

Mike Bellafiore is the Co-Founder of SMB Capital and SMBU, which provides trading education in stocks, and options. Bella is the author of One Good Trade and The PlayBook.