Alibaba shares have been trading in a downtrend, with a descending trend line connecting the recent highs. At the moment, price is testing the falling resistance area around the $103.30/share level. A reversal candlestick at this area could be a signal that the downtrend is set to resume.
If so, price could head back to its recent lows near the $96/share level. Weak selling pressure might last only until the $100/share psychological level while strong momentum could result to the formation of new lows.
Alibaba Shares Outlook
On the other hand, an upside break past the $104.00/share level could indicate that a short-term reversal is underway. This could lead to gains until the $110/share level, which appears to be the next resistance level.
The BOC interest rate cut appears to have stoked demand for Alibaba stock and US equities, as this led to speculations that the Fed might take it easy with its tightening bias. This could guarantee a longer period of low interest rates and cheap credit for US companies.
Investors remarked that Alibaba shares might’ve completed a corrective wave pattern and is in a prime potential for selling once more. Shares have been under selling pressure recently and has performed worse than US equity indices such as the S&P500. Alibaba shares have also traded below the 50 simple moving average on the daily chart.
However, zooming out to the longer-term time frames suggest that there is still a possibility for an upside move and an eventual test of the previous highs at the $120/share level. It would take an extraordinary amount of buying momentum to set forth this move though.
In the September quarter, Alibaba Group reported that its largest marketplace, Taobao, grew an impressive 38% year-over-year (YoY) to RMB 380 billion in gross merchandise value (GMV), and its second-biggest platform, Tmall, expanded an even more astonishing 78% to RMB 176 billion. A continuation of this performance could help shore up Alibaba shares.
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