After reaching this year’s high, at 159.69 on May 3rd, the Alibaba Group Holding Ltd stock (NYSE: BABA) reversed back to the downside and since then, continues to drift lower. The share price is trading below its short-term downside resistance line taken from the high of that reversal day. If the line remains intact, this may support the idea of a further decline. Even though, at some point, we may see a small retracement back up, but the price continues to trade below that downside line, we will stay bearish, at least in the short run.
As we already can see, yesterday’s price action led to a close below one of its key support areas, at the 160.00 level, marked near the highs of January 25th and 29th, and also by Monday’s low. Such a move now opens the door for a possible move further down towards the 155.77 hurdle, which held the price from falling lower on January 29th. As we mentioned above, we may see the stock rebounding a bit to the upside, but if BABA struggles to overcome the aforementioned downside line, we may see another leg of selling. If this time the 155.77 zone fails to withhold the price from falling, its break could lead the stock towards a test of another potential support area between the 150.18 and 151.03 levels, marked by the lows of January 22nd and January 24th respectively.
Our oscillators, the RSI and the MACD, are already at their lows. The RSI is below 50 and is somewhat flat. The MACD is below both the zero and trigger lines, and slightly points lower. Although both indicators are already at their lows, until we see a clear reversal signal from them, we will remain sceptical about the upside idea, at least in the short run.
Alternatively, a break of the aforementioned downside line and a price-rise above the 168.49 barrier, marked by the low of May 17th, could indicate a possible reversal in the short-term downtrend. Such a move in the stock could attract more buyers, as it may give a bit more assurance that BABA might travel higher to test the 172.24 obstacle, or even the 175.23 hurdle, which is the low of May 16th. We may see the price stalling there for a bit, or even sliding back down. But if the stock continues to run above the 168.49 area, more investors could start joining in, potentially lifting the stock above the 175.23 barrier and clearing the path towards the 180.21 level, marked by the high of May 15th.
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