Alibaba Consolidates Bull Flag Breakout: Here's What's Happening

Alibaba Group Holdings, Ltd BABA was trading about 0.26% higher at the open on Wednesday, after closing Tuesday’s session flat.

The China-based e-commerce and tech giant has popped up about 1.5% since Friday’s closing price, without influence from the stock trading in Hong Kong. The Hang Seng Index has been closed since Friday for the Chinese New Year and will reopen on Thursday, at which point Alibaba’s price on the Asian exchange may adjust based on the stock’s movement on the NYSE so far this week.

Although the general market was tumbling in the premarket, with the S&P 500 looking to open over 1% lower, Alibaba was showing comparative strength.

On Monday, Alibaba broke up from a bull flag pattern, which Benzinga called out on Jan. 17, and has since been consolidating mostly sideways. In continued consolidation, Alibaba may settle into an inside bar pattern on Wednesday.

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The Alibaba Chart: Alibaba’s inside bar leans bullish because the stock was trading higher before forming the pattern. If Alibaba breaks bullishly from the mother bar later on Wednesday or on Thursday, the stock’s uptrend will continue.

• When Alibaba broke up from the bull flag, the stock ran into resistance at the upper range of a gap, which was a likely scenario. The stock has tested the upper range of the gap over the last three days, weakening the area.
• Alibaba’s most recent higher low within its uptrend was printed on Jan. 18 at $113.04 and the most recent confirmed higher high was formed at the $120.30 mark on Tuesday. If Alibaba runs into sellers who push the stock down under $113, the uptrend will be negated and the break from the bull flag will serve as a bull trap.
• Alibaba has resistance above at $121.95 and $130 and support below at $110.06 and $104.44.

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