This week we will look at Alibaba (NASDAQ: BABA) the dominant, Chinese "Amazon"...Only bigger. There are many names out there that are performing well better than the markets. Since the beginning of this year (and all of last year) stocks have been on fire. Alibaba has not participated lately. Since September of last year Alibaba has basically fallen asleep at highs. Sure, there are some moves higher and lower here and there, but for the most part the stock has remained in a large, sideways range.
Many times, after large moves, the markets or stocks do not pullback, rather they sit and trade sideways at highs. Really, its just due to now catalyst to push the stock to higher valuations. As this sideways move is taking place you notice that the media tends to focus elsewhere. With no immediate need for investors to chase, and no need for existing investors to sell, the stock remains sideways.
Alibaba currently has a wide, sloppy range but the highs are all we're really interested in. The highs of around $192.50 continue to show multiple times of resistance. Each time it moves up to that number it sells off. In previous examples we noted how the following pullbacks tend to be shallower and shallower, indicating that the selling pressure is lightening. In this case we may actually be seeing the shallow low forming now. This week the stock has tried to selloff but buyers came in at $180. If this is the next low then we could run back up to the $192.50 area rather quickly.
The best possible timing on this would be if the stock were to breakout due to earnings. If the stock were to move above $192.50, it would attract many technical investors anyways. But, if the stock can breakout due to earnings then you would have the media's attention, the fundamental traders attention, AND the technical traders. This could lead to a rather sharp move that pushes us over $200.