Stock of the day: Alibaba
31 July 2023
Alibaba, a giant in the e-commerce industry, wrapped up last week on a distinctly bullish note. The stock saw an uptrend, concluding Friday's trading session at its highest level since mid-April. A deeper delve into the technical indicators provides a clearer insight into its current performance and potential future trajectory.
First and foremost, Alibaba's price action completed what's referred to as an 'inverse head and shoulders' pattern. For those unfamiliar with this technical formation, it is often seen as a reliable bullish reversal indicator following a downward trend. This specific pattern on Alibaba's chart is delineated in blue.
The importance of Friday's surge cannot be overstated. It wasn't just a random spike – it signified a decisive breakout above the 'neckline' of the aforementioned pattern. This neckline, depicted in red on the chart, serves as a pivotal threshold. When the price surpasses this line, as it did on Friday, it effectively confirms and activates the buy signal inherent to the inverse head and shoulders formation.
Looking ahead, the immediate target for Alibaba's price seems to be around the $120 mark. This projection is based on the yellow zone on the chart, representing a formidable horizontal resistance encountered at the tail end of January and also throughout the initial months of the preceding year. With the momentum gained from the recent breakout, the odds of Alibaba reaching, or even surpassing, this target appear rather favorable.
However, as with all stock analyses, it's crucial to also consider potential bearish shifts. The current bullish outlook on Alibaba will come under scrutiny if the price retraces its steps, falling below the red neckline. A more dire reversal indicator would be if it continues its downward slide to breach the green line, symbolizing a long-term uptrend. Should that scenario unfold, it might necessitate a reevaluation of Alibaba's bullish potential in the near term.