Alibaba Stock Is Moments Away from Lift-Off

Alibaba StockBABA Stock: An Explosive Setup

I have been writing about Alibaba Group Holding Ltd (NYSE:BABA) stock since the summer of last year, and I have to say that this stock has served me well with the method of investment analysis I employ, because I have been able to call each and every swing in BABA stock. I could use this publication to boast about my success, but that is not my intention. Alibaba stock is approaching a key technical level of resistance, and if it can successfully breach this level, it will set the wheels in motion that could send the stock price into the stratosphere.

Before I move forward, it is only wise that I disclose that the method of analysis I employ to generate a view on BABA stock is technical analysis. This method of investment analysis is based on the notion that historical price and volume data points can be used to project the future direction of a stock’s price. This method of analysis is contingent on my skills and abilities to decipher the indications that are generated using the Alibaba price chart. I have spent the better part of two decades dedicating myself to this craft and have gained a level of proficiency in the process.

The following price chart illustrates the key technical level that Alibaba stock is now testing. I refer to this price point as the last level of resistance.

BABA price chart

Chart courtesy of StockCharts.com

BABA shares are currently testing an extremely important level of price resistance. This level of price resistance was established three months after shares began trading on a public exchange. This level of resistance encompasses the early enthusiasm that investors held for this company. Early enthusiasm that was ill-warranted at the time because price soon corrected significantly. It has taken almost three years to return to this level of resistance once again.

Above this price point, there is no other level of price resistance, because breaking above it will create a new all-time high. An all-time high creates a dynamic where anyone who ever shorted BABA shares is now holding a losing position. Such a dynamic creates an environment where the path of least resistance is geared towards higher prices, because the short sellers create a bullish tailwind covering their positions.

At first glance, breaking above this level of resistance would generate an initial price objective of $180.00. This price objective is obtained by taking the depth of the pattern below this last level of resistance, and extrapolating it above the pattern.

I have seen similar setups like this one before, and if BABA stock can successfully break above this key level of resistance, it will set the wheels in motion for a much higher stock price, higher than even the level suggested by the price objective I just provided. For instance, the following Shopify Inc (NYSE:SHOP) stock chart illustrates a similar setup that was created late last year when Shopify stock was challenging its post-IPO high.

IMG_0037

Chart courtesy of StockCharts.com

In December of last year, as the stock price was approaching the post-IPO high, I outlined the magnitude that such a breach of resistance would create. It is why I dubbed Shopify stock my rock star top pick of 2017. Since that day, SHOP stock has more than doubled, easily earning that rock star title I placed upon it. Notice how the chart pattern looks very similar to the Alibaba stock chart.

I am sure we have all heard of Facebook Inc (NASDAQ:FB). I am focusing on this company as well because its stock experienced that exact same type of price action after its IPO. The following price chart illustrates what occurred to Facebook after it breached its post-IPO high.

FB stock chart

Chart courtesy of StockCharts.com

Facebook stock, just like the previous two charts I outlined, has a similar type of price action. There is an overwhelming amount of enthusiasm towards an IPO, and this causes a top to be formed early on. This top creates a significant of level of price resistance. When the stock is able to return to this level years later and finally breach it, it opens the door to much higher stock prices.

BABA stock is now sitting in such an exact position, and it is why I am really excited about the prospects of this investment going forward. If Alibaba stock can successfully break above resistance at $120.00, it will open the door to much higher stock prices. I will even go out on a limb to suggest that a successful break above resistance would easily earn this investment similar rock star status as Shopify and Facebook.

Bottom Line on Alibaba Stock

Alibaba stock is testing an extremely important level of price resistance. If BABA stock can successfully navigate through this level of resistance and break above it, it will open up the door for an epic run to the upside. This bullish view is based on other investments that contained similar stock chart characteristics.