BABA Stock Price Is Near Its Last Level of Resistance
I have been reporting my investment views on Alibaba Group Holding Ltd (NYSE:BABA) stock since last summer, and I am fortunate enough to say that my views on this investment have been spot on. I can’t say I am right all the time (because I’m not), but when it comes to Alibaba stock, I have had luck on my side.
When I refer to “luck,” I am actually referring to having the BABA stock chart on my side. My intentions are not to gloat; I’m focusing on this investment once again because there are new developments on the BABA price chart that are suggesting higher prices.
To clarify for anyone who hasn’t had an opportunity to read my previous publications, I generate my views about potential investments by using technical analysis. This method of investment analysis is based on the notion that historical price and volume data can be used to discern a trend and forecast future prices. This may sound like a silly notion, but I you assure you, it is not.
I have had much success in applying this method to my trading strategies, and my current followers can attest to the value that this method of analysis can provide.
Alibaba stock has a special affinity for support and resistance levels, and this article focuses on two such levels.
The following stock chart illustrates the level of resistance that BABA stock has just overcome.
Chart courtesy of StockCharts.com
I will begin with the moving average convergence/divergence (MACD) indicator, located in the lower panel of the price chart above. The MACD is a simple and effective trend-following momentum indicator which uses signal-line crosses to distinguish between bullish and bearish momentum. This indicator was created by using a weekly scale in order to smooth the indicator, as well as add more credence to the actual signals when they are generated.
In January 2017, a bullish MACD cross was generated, which is suggesting that bullish momentum is now propelling Alibaba shares and that, as a result, the path of least resistance is geared toward higher prices.
We can see from the bearish MACD cross that was generated in October of last year that this momentum indicator has an affinity for correctly confirming the predominant direction that BABA shares are trending in.
The bullish MACD cross that was generated in January correctly indicated that Alibaba shares were set to advance. This advance has now taken out a key level of price resistance. This level of resistance marks the price point where the previous rally in Alibaba was rejected, and a sell-off quickly ensued.
Breaking above a previous level of price resistance is now suggesting that a higher stock price is on the horizon. This suggestion is supported by the bullish MACD cross, which is still in bullish alignment, and continues to suggest that higher stock prices are likely.
The following price chart illustrates the next key level of resistance for Alibaba stock, which has become the next logical price objective.
Chart courtesy of StockCharts.com
The next key level of price resistance is the all-time high that was set three weeks after BABA stock started trading publicly. On November 13, 2014, Alibaba shares hit a high of $120.00, and a sell-off quickly ensued. This sell-off snowballed in quite the bear market downdraft as BABA shares proceeded to lose 52.33% of their value before the share price finally bottomed on September 29 2015, at a price of $57.20.
This level of price resistance that currently stands at $120.00 is extremely important, and a break above this level is not something that should be taken lightly. This level marks an all-time high. All-time highs are significant levels of price resistance, especially when they come shortly after a company begins trading publicly.
I have seen this type of setup on many occasions, and breaking above the all-time high has led to a substantial rally in the share price. Does Facebook Inc (NASDAQ:FB) stock ring a bell? When that company finally broke above the all-time high that was created on the day it began trading, it went on an epic run–an epic run that is still in development.
I can’t say that BABA shares will break above this level of resistance, but I am pretty confident that this level will be tested in the not-too-distant future. Breaking above $120.00 would suggest that much higher Alibaba share prices are likely to follow.
Bottom Line on Alibaba
I am bullish on Alibaba stock because the indications that have been generated on the company’s stock chart suggest that higher prices are likely. BABA stock is set to test a very important level of resistance, which also marks the all-time high that was set in 2014. Breaking above this level carries significant implications.
This bullish view has been generated using the Alibaba price chart. This view will remain bullish until there are indications on the price chart that suggest that another view is warranted.