Alibaba shares haven’t been able to recover so far, as the stock has been in a downtrend since November last year, days following its successful record-breaking IPO. Shares even gapped down by the end of January, although earnings reports haven’t been so disappointing.
MACD is almost in the oversold region, hinting that a bounce is possible. If so, Alibaba shares could break above the current consolidation and possibly fill the gap to the $95/share level. Further gains could lead to a test of the 50 simple moving average, which might hold as a dynamic resistance level.
Alibaba Shares Outlook
Further downside is expected for Alibaba shares though, as its CEO Jack Ma seemed downbeat about the company’s performance and prospects. He did emphasize that they would need to step up their operations, potentially leading to stronger profitability later on.
RSI is on its way down, which means that sellers are still very much in control of price action and could lead to a downside break from consolidation. In that case, Alibaba shares could fall below the $85/share mark on weakening investor confidence.
The upcoming FOMC minutes release could be a strong catalyst for a directional move, as this would set the tone for US equity action possibly for the week. Risk aversion has weighed on equities in the past days, leading to a few losses, but a positive assessment and outlook for the US economy might mean a strong bounce.
For now, Alibaba shares are trading below the 50 SMA, indicating that the path of least resistance is to the downside and that the trend might carry on for now. Potential pullbacks to the moving average are possible, although the longer-term direction might be sustained.
Bear in mind though that Alibaba has been attracting increasing investments from top companies such as Tiger Global as investors project further gains for the share price later on.
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