Alibaba Group Holdings Ltd BABA is set to print its second-quarter earnings on Nov. 18 and some retail traders are hoping the stock runs up into the event.
In October, Berkshire Hathaway Inc (NYSE: BRK-A) Vice Chairman Charlie Munger increased his position in Alibaba by 80% to over 302,000 shares. Meanwhile, on Nov. 4, Barclays analyst Jiong Shao said the firm sees 68.8% upside in Alibaba’s stock, giving a $275 price target.
On Wednesday, shares of Alibaba were trading up about 3.5% higher following a bounce in the overall markets after a four-day retracement caused the SPDR S&P 500 to fall more than 1%. Alibaba still has a lot to prove to bullish investors, however, as the stock has yet to confirm a meaningful trend change.
The Alibaba Chart: On Oct. 19, Alibaba broke up from a bull flag pattern Benzinga called out two days prior. The stock then over 6% higher, but on Oct. 20 and Oct. 22 created a bearish double top pattern and the $182.09 level and entered into a downtrend.
Throughout the downtrend, Alibaba has made a consistent series of lower high and lower lows down to the $158.30 level where the stock bounced. Despite the bounce, Alibaba has not yet been able to pop over the most previous Nov. 4 high of $169.94, and until the stock trades over the level, it will not confirm a bullish trend change.
Alibaba has multiple gaps on its chart that are likely to fill in the future because gaps on a chart fill about 90% of the time. The closest gaps to Alibaba’s current price are the gap below between $144.89 and $150.75 and the gap above in the $193.11 to $194.73 range.
On Wednesday, Alibaba was able to regain the eight-day and 21-day exponential moving averages (EMAs) as support, but the eight-day EMA is trending below the 21-day, which indicates indecision. If Alibaba is able to trade higher over the coming days the eight-day EMA will cross above the 21-day, which will give bulls more confidence going forward.
- Bulls want to see big bullish volume push Alibaba up to the $170 level, which will be a higher high and then for sustained bullish volume to drive the stock up toward the $179 level.
- Bears want to see big bearish volume come in and push the stock down below $158.30, which will confirm the downtrend is still intact and cause Alibaba to lose support at $163.60. Below the level, there is further support at $155.50.
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