Alibaba Stock Continues To Run Higher As Jack Ma Resurfaces Abroad: What's Next?

On Tuesday, Alibaba Group Holdings Ltd BABA broke up from a bull flag pattern Benzinga called out on Oct. 17. The China-based e-commerce giant reversed into an uptrend on Oct. 5 after a multi-month downtrend where the stock lost over 55% of its value due to Chinese government crackdowns and strained U.S.-China relations.

Alibaba founder, Jack Ma, was reported to be in Spain on Wednesday for an agricultural study tour. The trip marks the first time Ma has traveled abroad since making critical statements about China’s banks and regulators last year.

Alibaba’s Hong Kong shares rallied nearly 9% higher on the news Ma had resurfaced. The gains didn’t spill over into the U.S. markets, however, and while Alibaba opened Wednesday’s trading session about 2% higher, the stock closed flat.

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The Alibaba Chart: Alibaba has soared up over 27% higher since reaching the Oct. 4 bottom near the $139 mark. Alibaba has made fairly consistent higher highs and higher lows within the uptrend, which may give bulls confidence going forward.

The stock may be in need for its next higher low because when Alibaba broke bullishly from the flag formation, its relative strength index (RSI) almost reached 67%. When a stock’s RSI nears or exceeds the 70% level, it becomes overbought, which can be a sell signal for technical traders.

Alibaba has a number of gaps on its chart and because gaps fill about 90% of the time, it's likely Alibaba will trade into all, or at least most, of the empty trading ranges in the future. The stock has gaps above between $193.11 and $194.73, between $206.89 and $212.60 and in the $219.50 to $221.36 range. There is also a gap below between $144.89 and $150.75.

The stock is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. Alibaba is trading well below the 200-day simple moving average, which indicates overall sentiment is still bearish.

• Bulls want to see a higher low print to cool the RSI further and then for big bullish volume to come in and drive Alibaba back up above a resistance level at $179.15. If the stock can regain the level as support, it has room to trade up toward $196.75.
• Bears want to see big bearish volume push Alibaba down below a support level at $170.87. If the stock were to lose the area of support, it could fall toward $155.50, which would negate the uptrend.
  

• Photo: Andy Mitchell, Flickr