Alibaba Crosses A Critical Support Level: Is This The Last Straw?

Alibaba Crosses A Critical Support Level: Is This The Last Straw?

Photo credit: The Conmunity - Pop Culture Geek, via Wikimedia Commons

Alibaba Group Holding LTD. (BABA) shares are trading lower Thursday after the company released worse-than-expected earnings. Although EPS saw a year-over-year rise of 21.5% at $1.58, this missed the analyst consensus estimate of $1.78.

Alibaba’s revenue for the quarter rose to RMB187.4 billion from RMB114.3 billion. The consensus was for RMB180.2 billion, according to MarketWatch. Alibaba's stock was down 5.6% at around $207.50 at the time of publication.


Alibaba Daily Chart Analysis

Alibaba shares look to have broken out of what technical traders may call a descending triangle pattern. The stock is trading below both the 50-day moving average (green), and below the 200-day moving average (blue), indicating sentiment in the stock has been bearish. The price may find resistance near each of these moving averages in the future.

Key Levels To Watch

  • The stock was trading in a descending triangle pattern before breaking below the support and seeing a push lower.
  • The descending triangle pattern is considered a bearish continuation pattern that may see a further drop-off following the break of support.
  • The support from the pattern could be found near the $220 level, but as the price has been below this level, it may hold as resistance.

What’s Next?

Bullish technical traders would like to see the stock bounce and start heading higher. If the stock can break above the pattern resistance, the trend may be considered changed. If the trend changes, bulls would want to see the stock form higher lows. Bearish technical traders would like to see the stock now hold the $220 level as resistance. If the stock is unable to cross back above this level in the coming days, it may see a strong sell-off.

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