The BABA Stock Chart Is Raining with Bullish Indicators

BABA stockBABA Stock: The Bull Rages On

Alibaba Group Holding Ltd (NYSE:BABA) stock continues to exhibit bullish tendencies that support the notion that higher prices are a likely outcome. These bullish tendencies consist of bullish price action and indicators that are generated on the Alibaba stock chart using technical analysis.

Technical analysis is a form of investment analysis that uses historical volume and price data to discern trends and forecast future prices. This method of investment analysis is the foundation of all my investment views and trading strategies.

In early January, I dubbed Alibaba a top pick for 2017 in a publication titled “Alibaba Group Holding Ltd: BABA Stock Is a 2017 Top Pick.” In that report, I outlined the following stock chart as the catalyst that generated my view.

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Chart courtesy of StockCharts.com

In the middle of September 2016, BABA stock peaked just short of $110.00, and began to drift lower. This drift lower was orderly and defined, and a simple downtrend line was used to define this bearish trend. This level of resistance is created by connecting the peaks on the stock chart.

In late December 2016, Alibaba stock retraced a good proportion of the gains for the year, and was testing a critical level of support. This level of support needed to hold in order to maintain the prospect that a bull market in BABA stock was still in play. A bounce quickly developed off that critical level, and a rally ensued that was finally able to break above the resistance outlined by the downtrend line.

This breakout, which is highlighted in the above chart, confirmed the notion that the trend toward lower prices had concluded, and that a new trend toward higher prices had commenced. It was this feat that earned Alibaba stock my designation as a top pick for 2017.

The bullish price action that followed the breakout continues to support the notion that higher Alibaba stock prices are likely.

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Chart courtesy of StockCharts.com

The price action that followed the breakout of the downtrend line was healthy in its construction, indicating that the trend toward higher prices in BABA stock is sustainable.

Healthy trends are characterized by impulse waves that advance the price, and consolidation waves that alleviate any overbought conditions and set up the next impulse wave. This alternating wave structure between impulse waves and consolidation waves is a staple among sustainable long-term trends.

The most recent consolidation wave has just been completed, and this completion was indicated via a price breakout, and is highlighted on the chart above. This breakout now suggests that a new advancing impulse wave is in development, which implies higher prices for BABA stock.

The following stock chart illustrates that bullish indicators continue to mount, suggesting that the trend toward higher prices will continue.

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Chart courtesy of StockCharts.com

The BABA stock chart above illustrates that the moving average convergence/divergence (MACD) indicator in the lower panel has a generated a bullish cross. MACD is a simple and effective trend-following momentum indicator, in which signal-line crossings are used to distinguish between bullish and bearish momentum signals.

This bullish cross is suggesting that bullish momentum is now in force and, as result, the path of least resistance is toward higher prices. This signal acts to reinforce the notion that higher prices are likely, as suggested by the price action on the BABA stock chart. I have found it always wise to tilt my trading strategies in the direction of this momentum indicator.

Bottom Line on Alibaba Stock

I am bullish on BABA stock because of a confluence of indicators on the chart that supports the notion that higher prices are a likely outcome. My bullish views are based on technical indicators, and if these indicators begin to suggest that another view is warranted, I will adjust my view appropriately.