Alibaba Might Be Finally Making A Reversal: Here's Why

Alibaba Group Holding Ltd - ADR BABA shares are trading higher Wednesday following data that showed China's inflation rose slower than expected in December, which increased optimism about the easing of policy. The stock looks like it may be finally turning around as it approaches support in a downward channel.

Alibaba was up 3.58% at $136.85 Wednesday afternoon at publication.

See Related: Why Alibaba And Pinduoduo Shares Are Rising

Alibaba Daily Chart Analysis

• The stock is nearing resistance in what traders call a downward channel. The stock has been unable to cross the pattern resistance in the past which has led to a downward trend. If the stock can cross above this resistance line it may see a change in trend and could begin to form an upward trend.
• The stock crossed above the 50-day moving average (green) but trades below the 200-day moving average (blue), indicating the stock is likely facing a period of consolidation. The 50-day moving average may now hold as an area of support, while the 200-day moving average may act as resistance.
• The Relative Strength Index (RSI) has been climbing higher the past month or so and sits at 60. This shows buyers have been moving back into the stock and signals a reversal may be happening.

What’s Next For Alibaba?

The price has been moving in this downward trend for months and now looks like it may be starting to turn around. If the price can cross back above the pattern resistance, it may be a hint the stock is seeing a reversal and could begin to start climbing for a period of time. Bulls are looking for the resistance level to be broken and for the stock to form higher lows. This could show the trend change is coming and a long-term upward trend may be starting. Bears are looking for the price to fall back below the 50-day moving average and for the price to be able to hold below the channel’s resistance.

Photo: Courtesy Alibaba