Alibaba Stock Slides Amid Investor Fear, Impending Rate Hikes: Keep An Eye On This Pattern

Alibaba Group Holdings, Inc BABA opened lower and continued to slide intraday, falling over 3.5% by early Wednesday afternoon.

The Hang Seng closed down 1.79% at 336.80 HKD, adding pressure to Alibaba and a number of other Chinese blue-chip stocks.

Consumer price index data released by the U.S. Labor Department last week showed inflation remained elevated above expectations in August, despite four separate rate hikes initiated in March, May, June and July. The news brought fear that the Federal Reserve could hike rates by 0.75% or even by a full percentage point.

The prospect of another large rate hike stoked fears that liquidity could dry up in China’s markets. In contrast to the U.S., the Chinese government is in the process of boosting the economy through quantitative easing.

The yuan also fell to a 26-month low amid China’s continuing strict COVID-19 controls.

Alibaba’s most recent downtrend started on Aug. 26. Wednesday’s bearish price action is both a continuation of the downtrend pattern and a break-down from a bear flag pattern.

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The Alibaba Chart: Within the downtrend, Alibaba’s most recent lower high was formed on Tuesday at $88.73 and the most recent confirmed lower low was printed at the $85 mark the day prior. Eventually, Alibaba will find another temporary bottom and bounce up, most likely to print another lower high.

• The recent decline between Sept. 12 and Sept. 19 paired with the bounce on Monday and Tuesday settled Alibaba into a bear flag pattern on the daily chart, which the stock broke down from on average volume. The measured move of the flag is 10%, which indicates Alibaba could fall toward $80.
• If Alibaba closes the trading day near its low-of-day price, the stock will print a bearish kicker candlestick, which could indicate lower prices are in the cards for Thursday. If the stock bounces up to form a lower wick, Alibaba will print a hammer candlestick, which could indicate a bounce is on the horizon.
• Alibaba has resistance above at $83.84 and $89.95 and support below at $80 and $73.28.

See Also: How to Read Candlestick Charts for Beginners

Photo: Courtesy of alibaba.com