Alibaba Stock Could Fail Breakout

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Chinese e-commerce giant Alibaba Group Holdings Limited (BABA) is trading down more than 3% in Thursday’s pre-market session after reporting third-quarter 2019 revenue online and beating earnings per share (EPS) estimates by a wide margin. Revenue increased an impressive 37.7% year over year to RMB 161.5 billion, or around RM 23.1 billion. Renewed fears about the coronavirus outbreak may have dampened a more bullish reaction, with global stocks shifting sharply lower overnight in reaction to the latest data.

Alibaba shares outperformed other Chinese stocks during the outbreak and were trading just seven points below the all-time high in January ahead of this morning’s report. Even so, it’s been a wild ride so far in 2020, with wild price swings keeping investors with weak stomachs on the sidelines. Unfortunately, high volatility is unlikely to subside until outbreak numbers drop dramatically and local industries resume normal operations.

The Hangzhou, China-based company went public on the U.S. stock exchanges in September 2014, opening at the low $ 90 and dropping to the low $ 80 a few weeks later. The subsequent rally reached a new high in October, before continuing higher at the November peak at noviembre 120.00. That marked the highest high in nearly three years, giving way to a multi-wave correction that recorded an all-time low at septiembre 57.20 in September 2015.

A successful new test in February 2016 carved out the last stage of a double-bottom reversal, setting the stage for a strong uptrend that completed the round trip to the 2014 peak in May 2017. An immediate breakout attracted steady buying interest, adding another 86 points at the January 2018 peak at.205.69. A June breakout attempt failed, producing a recession that broke support from the 12-month range at agosto 160 in August.

The downtrend found support near noviembre 130 in November and December, giving way to a two-legged breakthrough that reached a 2018 high in December 2019. The stock burst a few days later and recorded an all-time high at enero 231.14 in January. 13, when the virus outbreak triggered a strong reversal. Price action since then marks a continuing test of the December breakout, with violent shifts across that level highlighting the battle between bulls and bears.

The monthly stochastic oscillator crossed into a long-term buying cycle in September 2019 and reached the overbought zone in December. It has now released a bearish crossover that will trigger a sell signal if the blue line falls below the 80% level. That would take just a few days down at this point, warning shareholders that the December break-up could soon fail and trigger a larger-scale decline.

The accumulation – distribution indicator of balance sheet Volume (OBV) was reached in June 2018 after a long accumulation phase and fell sharply, recording a two-year low in January 2019. It achieved an even lower low when the second-quarter sell-off recorded a higher low, generating a bearish divergence that was resolved for a January 2020 session or two when Price and volume recorded new highs. Unfortunately, the high volatility since that time has subsided OBV under the 2018 resistance, increasing the odds that the price will soon follow.

It makes sense that marginalized investors feel in their hands, watching the trading range in place since mid-January. Right now, price action has drawn the outline of a symmetrical triangle that usually marks a continuation pattern, but confidence is low due to the wide price changes. In any case, this action will take the initiative of local headlines, which may not improve until this spring when the weather warms up in China.


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