The Indicator Suggesting That BABA Stock Is Primed for Higher Prices

 baba stock analysis
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BABA Stock: Increasing the Odds of a Move Toward Higher Prices

The second quarter has begun, and earnings season is now in full effect. Thus far, earnings have been quite good. The elevated level of volatility that persisted in the first quarter has subsided, and the markets have not broken below any major levels of price support.

These factors all increase the odds that the second quarter is likely to be a good one, which will differ greatly from the first. That quarter was a wild one, and it lacked any ability to sustain an advance.

A move toward higher stock prices in the second quarter will vindicate my belief that the market indices are still primed for a move toward higher values. This is a view that I have expressed over and over as the markets were correcting in the first quarter.

I am currently focusing on Alibaba Group Holding Ltd (NYSE:BABA) because I believe it is likely to stage a move toward higher prices alongside the market indices.

I am actually really excited to return to this name because it is quite nostalgic for me.

The last time I covered Alibaba stock was on September 25, 2017, when I published a report titled “BABA Stock Hits My Influential $180 Price Objective.” In that report, I outlined that my price objective of $180.00 had been met and that, therefore, it was time to act accordingly.

The reason why I have returned to focus on BABA stock is that a very influential momentum indicator is about to generate a bullish signal. This suggests that Alibaba stock is very likely to stage a move toward higher stock prices.

This influential momentum indicator is highlighted on the following Alibaba stock chart.

Chart courtesy of StockCharts.com

The indicator highlighted on the above BABA stock chart is the moving average convergence/divergence (MACD).

MACD is a simple yet effective indicator that uses the crossing of a signal line in order to determine if bullish or bearish momentum is influencing the price action in a stock.

Bullish momentum implies that a stock is likely to advance because the bullish crowd is in control. Meanwhile, bearish momentum implies that a stock is likely to decline because the bearish crowd is in control.

This indicator provides very pertinent and valuable information because a stock cannot sustain a move in either direction unless the applicable level of momentum is supporting it.

For example, soon after my call to action last September, a bearish MACD cross was generated. While this indicator was in bearish alignment, BABA stock traded within a range bound by resistance at $205.00 and support at $165.00.

Alibaba spent the majority of the time testing support at $165.00 while this indicator was in bearish alignment.

A bullish cross will negate the bearish implications suggested by the bearish MACD cross, and a bullish cross is currently in development. As long as Alibaba stock does not sell off drastically in the coming week, a bullish signal will be generated.

A bullish signal would imply that Alibaba is once again geared toward higher stock prices. This would likely result in a break above resistance, which resides at $205.00.

It would open the door to much higher prices, because there isn’t any resistance above this price point to contain BABA stock from advancing.

Analyst Take

A very influential momentum indicator is on the verge of generating a bullish signal on the Alibaba stock chart.

This signal would strongly increase the odds that BABA stock will stage a move toward much higher stock prices.