Alibaba Holdings ( BABA) has been in a long decline since the middle of 2020. Prices reached the $315 area in its zenith and just touched $90.82 on Thursday on fears that Chinese companies may be delisted from U.S. exchanges. Let's look at the charts and indicators and not get swayed by rumors.
In this daily bar chart of BABA, below, we can see that prices have traded lower the past 12 months. BABA is below the declining 50-day moving average line and the bearish 200-day moving average line. Prices gapped lower Thursday and trading volume was heavier than average suggesting we might be witnessing an exhaustion gap.
The daily On-Balance-Volume (OBV) has been in a downtrend the past year and there are no signals of a reversal. The 12-day price momentum study shows a low in early December and a higher low now even though prices made lower lows over the same time period. This is a bullish divergence but it may not be enough to generate a reversal.
In this weekly Japanese candlestick chart of BABA, below, we fail to find a bottom reversal pattern at this point in time. We also fail to see any lower shadows to at least tell us that traders have begun to reject the lows. Prices are below the negatively sloped 40-week moving average line.
The weekly OBV line is pointed down but the 12-week price momentum study has been improving since September. A slower rate of decline has not translated into a rebound however.
In this daily Point and Figure chart of BABA, below, we can see a still lower downside price target of $75. A trade at $102 could improve this chart.
In this weekly Point and Figure chart of BABA, below, we see that the software suggests a still deeper decline to the $53 area. Don't shoot the messenger.
Bottom line strategy: The news tends to be the worst at the bottom and we need to focus on the price action - wait for a day or week when BABA ignores what appears to be bearish news. Maybe Thursday was an exhaustion gap and it will soon be filled. Avoid the long side for now.
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