Alibaba shares are trading inside a descending triangle pattern visible on the 4-hour and daily time frames. Price is currently testing the top of the formation around $78.50 and might be due for a selloff due to the ongoing SEC probe on the company.
If so, Alibaba shares could sell off until the triangle support at $60 or much lower. However, the 100 SMA is above the 200 SMA for now to indicate that the path of least resistance is to the upside. A break past the triangle resistance could spur a longer-term climb for the stock.
Stochastic is on the move down so sellers are in control. RSI is also heading south so Alibaba shares could follow suit. Word on Wall Street is that the company is currently being investigated by the US Securities and Exchange Commission for its accounting practices.
Company representatives have declined to comment but reiterated that they are cooperating with the regulatory agency. They noted that the SEC made a formal request for information but did not indicate that it believed federal laws had been violated.
Alibaba disclosed that the SEC probe had been launched earlier this year focused on the accounting for logistics firm Cainiao Network which is approximately 47% owned by the company. In particular, the SEC investigation is focused on the numbers for the “Single’s Day” sales.
A number of big investors are already increasing their short interest on the stock, citing that a number of figures haven’t been disclosed properly, possibly deceiving investors.This investigation marks the second time that US authorities have opened a probe on Alibaba, as a report by a Chinese regulator in 2015 prompted the SEC to launch an investigation on whether earlier criticisms on the company should’ve been disclosed or not.
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