The Alibaba stock (NYSE: BABA) traded lower yesterday, breaking below the upside support line drawn from the low of June 29th. That said, it continues to trade above the uptrend line taken from the low of March 23rd, and thus, we would consider any further short-term declines as a corrective phase within the broader medium-term uptrend.
A clear and decisive dip below Tuesday’s low of 266 would confirm a forthcoming lower low and could extend the correction towards the 255 barrier, which provided support on August 20th. If the bears are not willing to stop there, then a break lower may open the path towards the aforementioned medium-term uptrend line, or the 246 support level, marked by the low of August 10th.
Looking at our short-term oscillators, we see that the RSI runs below 50 and points down, and the MACD lies below both its zero and trigger lines, pointing south as well. Both indicators detect increasing downside speed and corroborate our view for some further correction to the downside, at least towards the pre-mentioned uptrend line.
Now, in case the price rebounds suddenly and breaks the 227 resistance, marked by yesterday’s high, we would consider this as the end of the correction and the resumption of the prevailing uptrend. The bulls may then get encouraged to drive the battle up towards the high of September 3rd, at 291, where a break may pave the way towards the stocks all-time high, at around 299, hit the day before.
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