Alibaba shares have been on a steady downtrend and found more selling pressure when price gapped lower last month. The stock seems to be hitting a key support level at the moment, as this area has held as a floor last October.
At the same time, MACD has been indicating oversold conditions for quite some time. This suggests that profit-taking off the short trades might be seen and price could make a bounce from the current levels at $80-84.50/share. A rally might last until the 50 simple moving average on the daily time frame, which has acted as a dynamic inflection point in the past.
Alibaba Shares Outlook
RSI is also reflecting a return in buying momentum, as the indicator has reached the oversold region and moved higher. This could mean that Alibaba shares might recover to the next area of interest near the $90/share level.
Much could hinge on the upcoming FOMC statement, which might set the tone for risk appetite and US equities in the coming months. The central bank is expected to hint that tightening could take place a couple of months from now, which might mean tighter credit and lower spending. This could take its toll on US stocks, as companies might project lower revenues and profits.
On the other hand, if the Fed maintains its cautious stance and outlook, US equities and Alibaba shares could draw support from a longer period of low interest rates. This might even be enough to push Alibaba stock past the $90/share level if risk appetite grows strong enough later on.
For now though, the path of least resistance is still to the downside, as the ongoing downtrend seems strong and price has been moving below the 50 SMA. A break below support at $80/share would confirm that Alibaba shares are in for more declines.
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