The Alibaba stock (NYSE: BABA) traded slightly lower the last few days, after it hit resistance at 218 on May 20th. Overall, it continues to trade below the downside resistance line taken from the high of October 27th, which keeps the medium-term outlook negative. However, before we start examining the case of larger declines, we would like to see a decisive close below the low of May 13th, at 204.
Such a break would confirm a forthcoming lower low on both the daily and weekly charts and may initially pave the way towards the low of May 4th, 2020, at around 189. Some investors may jump into the action from near that support, but if they fail to drive the price above the aforementioned downside line, another tumble may be possible. If, this time around, the stock falls below 189, then we may see extensions towards the 170 area, defined as a support by the lows of March 18th and 23rd, 2020.
Taking a look at our daily oscillators, we see that the RSI has recently exited its below-30 zone and now shows signs that it could turn up again. The MACD, although negative, has also rebounded and just crossed above its trigger line. Both indicators detect slowing downside momentum and suggest that a small corrective bounce may be in the works.
However, in order to consider a positive shift in the outlook, we would like to see a clear break above 246. The stock would not only be above the aforementioned downside resistance line, but it would also confirm a forthcoming higher high. Investors may decide to push the battle towards the 262 area, marked by the inside swing lows of February 8th, 9th and 18th, the break of which could encourage advances towards the peak of February 11th, at 274, or the high of November 24th, at 280.
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