Stock of the day: Alibaba
13 July 2023
In today's discussion, I'd like to shed light on Alibaba's recent trading patterns and where this might lead us. Alibaba's stock performance over the past few months could best be described as a descent, with its downtrend prevailing since January. The downtrend has been encapsulated within a wedge pattern, with the black lines on the chart reflecting its boundaries.
However, the market scene began to shift around mid-June. Alibaba made an upward move, breaching the wedge's confines. This breakout was a pivotal moment, serving as a clear buy signal for traders. The overall picture now appears to be changing, and the possibility of an upward trend is gaining traction.
Furthermore, there's another intriguing development in the chart patterns. An inverse head and shoulders pattern is beginning to emerge, depicted by the blue color on the chart. This classic reversal pattern, characterized by two smaller price movements surrounding a larger one, suggests a potential bullish turn. It's an encouraging sign, yet traders should exercise caution until the pattern is confirmed.
To transform this pattern into a concrete buy signal, we'll need to see the price break through the neckline, represented by the red line on the chart. A daily close above this neckline would offer compelling evidence for an uptrend, making it an excellent buy signal.
There is a possible bearish scenario lurking in the shadows, though it currently seems unlikely. A sell signal could emerge if the price falls below the green uptrend line. However, given the current market trends, the chances for this event appear to be limited.