Alibaba Technical Analysis: The Stock may Correct Lower

Digital Derivatives MarketsStocks, Trade Alerts

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Alibaba Technical Trading Strategy

Alibaba caught the eyes of many investors when the Initial Public Offering (IPO) was launched. The stock was able to peak over $115 before correcting lower at the time of this writing. The latest market news on Alibaba Group Holding Ltd. is the bond auction in which the firm expects to raise eight billion dollars. Traders speculate that over $50 billion were raised during auction as the market awaits the final results. Our technical analysis predicts moderate losses for the stock despite the bond sale.

As the stock is relatively new many analysts have difficulties in providing a decent projection for Alibaba. In our stock market research we were able to identify a trend in Alibaba 4hr chart that may signal the beginning of an intraday downtrend.

Alibaba 4hr Chart

Please click on the chart to enlarge:

Alibaba Trading Strategy 20 November 2014

Alibaba 4hr Chart 20/11/14

The stock has encountered a strong resistance level as market via the orange line, firmed by the 21 Moving Average (MA). To add the bearish intraday outlook for Alibaba, the double-top that was confirmed on 18 November suggests recent gains may be capitalized on by exercising sell-on-dips strategies. A 4hr close below the resistance level we have mentioned earlier may pave the way for further losses, targeting $101.32. The protective stop may be layered above the latter resistance ($113.55, purple line) at $114 while maintaining a decent Risk-Ratio (RR). As this is an intraday entry the duration the trade is expected to be minor, not more than seven days. We will continue to monitor the progress of our trading strategy and post updates at the bottom of this page when found relevant. You may subscribe to DDMarkets to be notified when an update is released.

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Last Updated on August 9, 2015