Alibaba Looks Stretched, But Can Go Higher
Alibaba ($BABA) Weekly: Lately I’ve been seeing a lot of posts about Alibaba ($BABA) in the forums and discussion boards. Partly I assume because those who stuck with it are a bit nervous about the meteoric rise it’s had in 2017, and I suppose on the opposite side, those that see that move and are wondering when they can get some of the action. I don’t like to to technical analysis with much confidence in such a young stock, and even much more so when it’s in the internet space and also a happen to be a Chinese company (that’s a discussion for another time, in another place). But let’s see what we can see here…
A look at the weekly chart shows that $BABA has a strong support/resistance level that it has met and cross in its short lifetime. This level is around the $83 area as shown in the chart. If you follow how the stock from the beginning, you can see that, it hit it as support in the beginning once, had a big rally, came back down to hit it again, had a much smaller rally, then fell below it on July 2015; then on the other side, with it as resistance, it hit it and had a big pull back, hit it again and had a much smaller pullback, then broke above it on July of 2016. Now if you just follow that, you would think it’s how odd it is that it mirrored the exact same pattern in the same period of time, and broke below and above this line both times in July. Hmm… I’ll leave that discussion for someone else to pick up, if there are any Alibaba stock conspiracy theorists out there. :)
Anyway, from that breakout, the stock continued to rally to a new high of $148 after giving back 50% of the initial move higher from bottom of Feb 2016 (getting support once again from the $83 support line area) at the beginning of June of this year, before giving some of that rally back last week. We can see that the technicals show that RSI is VERY overbought (almost hit 90 level) and MACD, although also stretched, has not yet rolled over to the downside. My guess is that the stock can move sideways and perhaps retest the highs in the next month or two, but what will be telling is what the technicals do in that move. If we start to see a decline in the RSI in to and below 70, and the MACD line crosses and rolls over, along with declining volume, we have to assume that the stock can also follow to the downside at this point as momentum wanes. But it should be noted that at current conditions, the stock can move higher with the RSI just staying above and around 70 and sideways for a while. Keeping eyes on the technicals can really give us a clue as to where the price may go and any signs of deterioration of momentum and selling pressure coming in. And when it does reverse and heads south, the places to look for support, would be the trendline support and the 50 week moving average, right now at about $102. My guess is that if it rolls over in the next few weeks, it will most likely come down to test the $110 level, say in September or so. But at this point, this is pure speculation based on insufficient information – i’m just eyeballing where the 50 week moving average may be along with the prior peak levels back in Sept 2016.
A look at the weekly chart shows that $BABA has a strong support/resistance level that it has met and cross in its short lifetime. This level is around the $83 area as shown in the chart. If you follow how the stock from the beginning, you can see that, it hit it as support in the beginning once, had a big rally, came back down to hit it again, had a much smaller rally, then fell below it on July 2015; then on the other side, with it as resistance, it hit it and had a big pull back, hit it again and had a much smaller pullback, then broke above it on July of 2016. Now if you just follow that, you would think it’s how odd it is that it mirrored the exact same pattern in the same period of time, and broke below and above this line both times in July. Hmm… I’ll leave that discussion for someone else to pick up, if there are any Alibaba stock conspiracy theorists out there. :)
Anyway, from that breakout, the stock continued to rally to a new high of $148 after giving back 50% of the initial move higher from bottom of Feb 2016 (getting support once again from the $83 support line area) at the beginning of June of this year, before giving some of that rally back last week. We can see that the technicals show that RSI is VERY overbought (almost hit 90 level) and MACD, although also stretched, has not yet rolled over to the downside. My guess is that the stock can move sideways and perhaps retest the highs in the next month or two, but what will be telling is what the technicals do in that move. If we start to see a decline in the RSI in to and below 70, and the MACD line crosses and rolls over, along with declining volume, we have to assume that the stock can also follow to the downside at this point as momentum wanes. But it should be noted that at current conditions, the stock can move higher with the RSI just staying above and around 70 and sideways for a while. Keeping eyes on the technicals can really give us a clue as to where the price may go and any signs of deterioration of momentum and selling pressure coming in. And when it does reverse and heads south, the places to look for support, would be the trendline support and the 50 week moving average, right now at about $102. My guess is that if it rolls over in the next few weeks, it will most likely come down to test the $110 level, say in September or so. But at this point, this is pure speculation based on insufficient information – i’m just eyeballing where the 50 week moving average may be along with the prior peak levels back in Sept 2016.
Comment:
One thing that is of some concern is this huge gap up it had in June 8th. I personally tend to believe that gaps do fill most of the time, especially BIG ones that push the stock to new highs. And in the Daily chart above, we can see how RSI can stay at these overbought levels as the stock grinds its way higher. What’s interesting is that there began a bearish divergence in the stock leading up to this gap up, where RSI heads lower as price heads in the opposite or sideways direction, but there must have been some kind of event or news (most likely guidance) that people did not expect that drove the stock higher here (I have not followed the news, although probably i will Google it and see what happened after I finish this post). That’s fine and all but one may think that whatever the original impetus was for the bearish divergence may resume, after this “gap up” thing has been digested going forward. So that’s one more thing that stock holders of $BABA or potential buyers should keep in mind. Wow, long post. That’s about it at this point, i think.