Since mid-June, Alibaba (NYSE: BABA) has been on a steady decline, trading within a falling channel. But finally, a couple of weeks ago, the share price managed to exit that pattern through the upper side of it and continues to remain above it. It looks like that the stock could be picking up interest from investors again, which could lead the price higher. It is trading above a short-term tentative upside line, which adds another positive spin on the near-term outlook.
In order to fully get comfortable with the upside, we would wait for a break above the 157.40 barrier, which was the high of the 15th of November. This way, a break would confirm a forthcoming higher high and Alibaba could travel up to test the 164.50 obstacle, marked by the high of the 3rd of October. Certainly, if the buying-interest stays on, a further push higher could lift the stock towards the 169.00 barrier, which was the high of the 21st of September.
Looking at our oscillators, the RSI and the MACD are both somewhat in support of the above scenario. The RSI, after bottoming on the 30th of October, has now shifted slightly above the 50 mark, which could be seen as positive, even though the indicator, at the time of this analysis, is a bit flat. The MACD is still having a good run higher from its October lows and now has overcome the 0 line.
Alternatively, if the stock fails to move above the previously-mentioned 157.40 level and then gets back inside the falling channel formation, this could be a sign of worry for the bulls. If the stock then drops below the 138.50 hurdle, marked by the low of the 1st of November, this could invite more sellers and the price might fall further towards the 130.00-dollar tag line, which was the lowest point of October. This is where Alibaba shares could stall for a while, until the bulls and the bears decide once again, who takes the driver’s seat from there.
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