The last time we reviewed the charts of Alibaba Group Holding (BABA) was September 16 and we recommended "Continue to hold longs in BABA from previous recommendations. Raise stop protection to a close below $260 now from below $250." Prices have dropped sharply Tuesday on heavy turnover but our stop loss level was not reached. With BABA rallying today let's check the charts once again.
In this daily Japanese candlestick chart of BABA, below, we can see some interesting developments. Prices gapped sharply lower on Tuesday and trading volume soared dramatically as traders reacted to media reports about suspending the Ant IPO and China looking at curbing credit platforms that funnel loans from financial institutions to millions of consumers across China.
(For more on BABA and the Ant IPO, see Last-Minute Ant IPO Suspension Is a Communist Show of Strength)
Prices have bounced back a bit today to climb above the rising 50-day moving average line but the trading volume is less than stellar.
The On-Balance-Volume (OBV) line shows weakness from early October and the 12-day price momentum study shows a lower high from September to October for a bearish divergence as prices actually made higher highs over the same time period. This bearish divergence tells us that the pace of the advance was slowing for several weeks.