Alibaba, Disney, Tilray Stocks Continue To Feed The Bears: When Will A Reversal Come?

Alibaba Group Holdings, Ltd BABA, Walt Disney Co DIS and Tilray, Inc TLRY are all trading higher in strong downtrends. A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart.

The lower lows indicate the bears are in control while the intermittent lower highs indicate consolidation periods. Traders can use moving averages to help identify an uptrend with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend and descending longer-term moving averages (such as the 200-day simple moving average) indicating a long-term downtrend.

A stock often signals when the lower low is in by printing a reversal candlestick such as a doji, bullish engulfing or hammer candlestick. Likewise, the lower high could be signaled when a doji, gravestone or dragonfly candlestick is printed. Moreover, the lower lows and lower highs often take place at resistance and support levels.

In a downtrend the "trend is your friend" until it’s not and in a downtrend, there are ways for both bullish and bearish traders to participate in the stock:

• Bearish traders who are already holding a position in a stock can feel confident the downtrend will continue unless the stock makes a higher high. Traders looking to take a position in a stock trading in a downtrend can usually find the safest entry on the lower high.
• Bullish traders can enter the trade on the lower low and exit on the lower high. These traders can also enter when the downtrend breaks and the stock makes a higher high indicating a reversal into an uptrend may be in the cards.

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The Alibaba Chart: On Dec. 3, Alibaba hit a support level at $108.70 and bounced up from the level over the two trading days that followed. The bounce was not even to print a higher high above the Nov. 24 high of $136.76, however, so the downtrend has continued.

On Monday, Alibaba was trading down over 6% and looks to be headed back toward the $108 level. The area is a key level because Alibaba hasn’t traded below it since April 7, 2017.

The Disney Chart: Disney had a similar bounce to Alibaba and was also unable to make a higher high for a possible trend change. On Monday, Disney fell below a support level at $147.85 and below the most recent lower low at $147.35 that was printed on Dec. 15, which indicates the downtrend is still intact.

The Tilray Chart: Tilray reached a high of $13.95 on Nov. 15 and then fell into a steep downtrend. On Monday, Tilray looked to be heading toward a lower support area at $7.16 and if the stock is unable to hold the area as support it could fall toward the $6.46 mark.