Medium term
Trade view / 09 April 2015 at 10:15 GMT

Time to revisit Alibaba stock

Trader / TheSteadyTrader.com
United States
Instrument: BABA:xnys
Price target:
Market price:
Background

Shares of e-commerce giant Alibaba Group (BABA:xnys) rallied on Wednesday on the back of a rumour that it may be merging with Ebay. Although the deal seems somewhat unlikely, BABA stock did make some constructive headway on the charts and may be setting up for a better momentum move higher.  

It's somewhat ironic that Alibaba, one of the most discussed momentum stocks of the past six months, has showed no signs of momentum at all since February. Much to the frustration of traders looking to jump on the back of momentum moves, BABA remains in a choppy sideways phase.

In early March, BABA stock dipped below its previous all-time lows from October 2014 but the bears have been unable to gain any real momentum to the downside and with Wednesday's rally, pushed the stock back above the blue line on the below chart. 

Also note that the stock on Wednesday bumped back into its 50-day simple moving average (yellow line) for the first time since January. if the bulls want to gain some momentum a push above there needs to take place.  

Alibaba

Source: Saxo Bank

On the closer-up chart, we see that Wednesday's move also pushed BABA stock back above a resistance trendline from February and that its early April lows held marginally higher than its early March lows. If the stock can overcome the $86-87 area, it would accomplish a higher high versus a recent high (in this case the March highs) for the first time in many months.

Alibaba

Source: Saxo Bank

Management and risk description

Any bearish reversal of Wednesday's rally would negate the near-term long-side setup in BABA stock.

Parameters

Entry: Buy the CFD at $86.50 or higher.

Stop: $84.

Target: $92.

Time horizon: 2-4 weeks.

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more
4y
Kraemer Kraemer
I am long on BABA from now on ... regardless of the eBay rumor ... for some reason it reminds me how FB moved after its IPO ... and within its next 12 months ....

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