Chinese tech stocks have been under pressure over the last year or so as traders and investors worry about the influence of Chinese government regulation on company business practice. I noticed a bit of Twitter chatter about Alibaba (BABA) during last week and this got me taking a closer look at its chart patterns and this latest pullback. A couple of traders expressed a new bullish bias for Alibaba and my technical analysis reveals the stock is currently trading near a key Support / Resistance level. The next week or two might decide whether this level can act as effective support to stem this latest decline.
BABA weekly: Alibaba (BABA) listed with an IPO share price of $68 on the NYSE in late 2014. Price action dipped down as low as $60 over the next 18 months but, after spending much of the first two years snaking either side of $80, it eventually cleared this region to trade higher and without much of a backward glance. The share price chopped higher from mid-2016 and peaked at just under $320 ($319.32) in late 2020 before this latest market pullback.
BABA weekly: the chart patterns below shows a Fibonacci retracement tool applied to the 2016 – 2020 swing High move from the $60 Low to the $319.32 High. Note how the share price has pulled back to the 61.8% Fibonacci level, near $160. This particular Fibonacci is a popular retracement level and interested traders can read more about this through the links here, here and here. Suffice to say that many traders and analysts will be watching this $160 level with keen interest over the coming weeks.
BABA weekly: the chart patterns below shows price action and the recent pullback in greater focus. Notice how the most recent weekly candle closed right near this $160 level as an indecision-style Doji candle.
BABA weekly: the weekly chart patterns below shows this latest swing Low pullback move captured within a Descending Wedge-style pattern. These are typically bullish-reversal patterns and examples of this behaviour can be found through the following link. Any bullish bounce up from the $160 level would bring the upper wedge trend line into focus.
BABA weekly: the weekly chart patterns below has another Fibonacci retracement applied but this one covers the swing Low move from the $319.32 High to the recent Low near $160. This retracement tool has been applied to help identify any potential target; should price action make a bullish breakout from the descending wedge pattern. Examples of the benefit of mapping for 61.8% Fibonacci retracement from bullish descending wedge breakouts can be found through the following links here and here.
The popular 61.8% Fibonacci retracement level, in this case, is currently near the $260 level which seems to be a bit of a reaction zone as well. This would be one potential level to target in the event of a bullish recovery off the $160 and bullish wedge breakout and this would be followed by the 100% retracement level, near $320.
Alibaba, like many Chinese tech stocks, has pulled back significantly over the last 11 months. The share price closed last week just below $160 which is the whole-number level very close to the 61.8% Fibonacci retracement of the 2016 – 2020 swing High move. The next couple of weeks will reveal whether this $160 will evolve to be effective support but, if so, then a bullish-reversal descending wedge may be worth monitoring and any bullish wedge breakout would bring $260 into focus as one major target.
About the Author:
Mary is a technical analyst and private trader based In Sydney, Australia and a member of the Australian Technical Analysts Association (ATAA). More information about her analysis and trading style can be found at Tradecharting.com.