Is Alibaba Stock Attempting To Reverse From This Pattern? What The Chart Shows

Zinger Key Points
  • Alibaba broke bearishly from a bear flag pattern, which Benzinga called out two days prior.
  • Bullish traders want to see the stock regain the eight-day EMA as support.

Alibaba Group Holdings, Ltd - ADR BABA spiked up 5% off the open on Tuesday morning before running into a group of sellers, which knocked the stock down to near flat to Friday’s closing price.

A bullish turn in the general markets caused sellers to come back into Alibaba, however, and by early afternoon the stock was shooting up over 4% again.

The China-based, e-commerce and tech giant posed a huge reversal between May 12 and July 8, surging more than 60%, before entering into a downtrend and losing 27%.

Alibaba is expected to print its first-quarter 2023 financial results before the open on Thursday.

When the company printed its fourth-quarter earnings on May 26, the stock gapped up more than 5% higher to start the trading day and rallied an additional 8.22% intraday.

For the fourth quarter, Alibaba reported EPS of $1.25 on revenues of $32.19, which beat the consensus estimate of earnings of $1.10 per share on revenues of $29.94 billion.

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The Alibaba Chart: On July 28, Alibaba broke down bearishly from a bear flag pattern, which Benzinga pointed out two days prior. The measured move of the break from the pattern is 22% and so far, Alibaba retraced about 17% in total.

Although Alibaba could complete the entire measured move after printing its next lower high, the temporary bottom is likely in because, on Monday and Tuesday, Alibaba printed a double bottom pattern at the $88 mark.

  • If Alibaba closes the trading session near its high-of-day price, the stock will print a bullish engulfing candlestick, which could indicate higher prices will come again on Wednesday. Bullish traders would like to see Alibaba regain the eight-day exponential moving average (EMA) over the next few days for more confidence going forward.
  • Bearish traders want to see Alibaba reject the eight-day EMA and for the area to mark the next lower high within the downtrend, which the stock has been trading in since July 8. If that happens, Alibaba is likely to continue in the bearish trend and complete the full 22% move of the bear flag.
  • Alibaba has resistance above at $96.17 and $104.44 and support below at $89.95 and $83.84.

Photo: Courtesy Alibaba

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