Shares of Alibaba Group Holding Ltd BABA suffered a technical breakdown this week that could be a bad sign for shareholders in the near term.
Hitting The Ground Running
After opening at $92.70 on its first day of public trading on September 19 of last year, Alibaba initially traded in a range between $82 and $95 over its first month. However, in late October, the stock started to take off. The stock made a brief four-day pause at the $100-level, then continued its climb as high as $120 by mid-November.The Pennant
After peaking at $120, Alibaba spent the next two months drifting lower. The stock found support near the $100 level in early December and again in early January, forming the familiar technical “pennant” formation on its chart.In the second week of January 2015, Alibaba broke below $100 (the support line of the pennant), and barely reclaimed the $100 level today, January 20 -- currently selling around $100.04. Without a long trading history to draw from, the only clear technical support level currently in the chart is the all-time low around $83.
One Potential Reason For The Breakdown
Alibaba’s Q4 earnings report is due out in February, but one possible explanation for the stock’s breakdown could be anticipation of an event even farther into the future. In March 2015, Alibaba’s first big lock-up period expires, and more than 429 million shares of insider-held stock will become unlocked and available to trade on the open market for the first time.© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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