Time to Raise Our Trading Parameters on Alibaba

 | Jul 13, 2017 | 2:31 PM EDT
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Stock quotes in this article:

baba

In our last update on Alibaba  (BABA) near the end of May,  we concluded that "it looks like BABA is headed higher to our $140 price target. I would risk a close below $115 now."

Now that BABA has touched $150 it is time for a fresh review of the charts and indicators.

In this daily bar chart of BABA, below, we can see that prices have continued in a "parabolic" rise. Dips or corrections are shallow or sideways -- a sign of strength as traders are willing to buy more aggressively. BABA is above the rising 50-day and the rising 200-day moving average lines. The daily On-Balance-Volume (OBV) line has been positive but it needs to move up to a new high to match and confirm the price gains. In the lower panel is the 12-day momentum study which shows lower highs in June and July compared to higher price highs. This is a bearish divergence and might raise a flag to the bulls.

Everything looks bullish on this weekly chart of BABA, below. Prices are above the rising 40-week moving average line. The weekly OBV line is bullish and the MACD oscillator is bullish.

In this Point and Figure chart of BABA, below, we can see the new high and a price target of $167/$168.

Bottom line -- longs are happy but they should look to raise sell stop protection to a close below $135 while looking for gains to $167 or higher.

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