Alibaba Pops 3% On Trade Optimism, And This Chart Shows More Room To Rise (Before It Fails)

Alibaba Group Holding Ltd BABA traded 3 percent higher on Tuesday. This move is based in part upon news reports that the U.S. and China have resumed preliminary trade talks.

U.S. Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He have started preparation for their respective boss’s meeting at the end of November. At that time, President Trump and Chinese President Xi Jinping are planning to meet over dinner at the G20 summit in Buenos Aires.

Mnuchin would like for China to begin the talks by making an offer that would set the foundation for the negotiations. However, Vice Premier He appears to want to move a bit slower, indicating that he is uncertain about what can realistically be achieved in such a short timeframe.

That’s a little surprising given the degree to which Chinese stocks have been negatively impacted by the trade war. Since hitting their YTD highs, the iShares China Large-Cap ETF FXI has lost a quarter of its value and Alibaba has declined by 30 percent.

In analyzing the market cycles for Alibaba, we can see that a short-term bottom appears to be in place, with the stock now in the rising phase of a new cycle. While we are negative on the stock on a longer time frame, we expect it to rise to a near-term resistance zone between between $155-165.

Alibaba Group Holding Stock Weekly Chart