Alibaba, Etsy, Microsoft Stocks All Resume This Bullish Pattern: How To Trade It

Alibaba Group Holdings, Inc BABA, Etsy, Inc ETSY and Microsoft Corporation MSFT are all trading higher in strong uptrends. An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.

The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods. Traders can use moving averages to help identify an uptrend with rising lower frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend and rising longer-term moving averages (such as the 200-day simple moving average) indicating a long-term uptrend.

A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.

In an uptrend the "trend is your friend" until it’s not and in an uptrend, there are ways for both bullish and bearish traders to participate in the stock:

• Bullish traders who are already holding a position in a stock can feel confident the uptrend will continue unless the stock makes a lower low. Traders looking to take a position in a stock trading in an uptrend can enter usually find the safest entry on the higher low.
• Bearish traders can enter the trade on the higher high and exit on the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low indicating a reversal into a downtrend may be in the cards.
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The Alibaba Chart: Alibaba hit a Nov. 5 low of $158.30 and reversed course into an uptrend. The stock has since made a fairly consistent series of higher highs and higher lows on the daily chart.

On Tuesday, Alibaba was trying to break up through heavy resistance at $169.94 to avoid creating a bearish triple top pattern at the level when paired with the price action from Nov. 4 and Nov. 11. Bulls will want to watch for a break of the area on high bullish volume for the trend to continue. 

The Etsy Chart: Etsy reached a new all-time high on Tuesday after rising up over 6% on fairly high volume. The move allowed the stock to print a higher high above Nov. 4 high of $283.40.

Eventually, Etsy will need to make another lower high above the $243.38 mark to cool the relative strength index (RSI), which is running into overbought territory at 70%. 

The Microsoft Chart: Like Etsy, Microsoft printed both a new all-time high and a higher high on Tuesday above the previous all-time high of $338.79. The new all-time high also negated a bearish double top pattern the stock printed on Nov. 5 and Nov. 9.

Microsoft’s RSI is also in overbought territory at the 72% level, which indicates the stock will need to consolidate and print a higher low in the future. 

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