Chart of the Week: Alibaba
Good morning everybody. It’s Wednesday, February 12. Time for our chart of the week. We’re gonna take a look at Chinese name Alibaba; BABA is the symbol. Let’s take a look at this stock. It’s been on a roll for the past month or so, and heading up towards resistance, but we think that even back up there would be a little bit of a pullback coming in, and that would be the time to be adding the stock.
As we see, the stock is pretty much overbought right now. Let’s take a look at the trend over here. You can see this channel has been making higher highs and higher lows.
We have a gap up here that needs to get filled – it’s about $117. That would really be the target where it could get to. Right now, we see the stock is down a little bit here in the premarket, but we think that this stock could make a run to at least fill this gap at $117. And fill this other gap from back in October. Much easier last week on Friday – pulled back and then had a great day on Monday, February 10.
Indicators are strong
Indicators are real strong. I put a new indicator up here that we haven’t seen for quite a while. It’s called the on-balance volume. This was created by Joe Granville back in the last 70s, early 80s. It tells us where money is flowing from the big boys, from the hedge funds and so forth.
We see that on-balance volume has been making higher highs and higher lows. This is a little bit of a different indicator from the Chaikin money flow. But still telling us the same story – we are at the highs of October over here.
So what does that mean? Basically a little bit of a warning sign, because the last time we got up to those highs in October, when on-balance was peaking, we came back down really hard here.
Do I expect that sort of movement to happen again? Not really, since this time around we have really, really strong volume, especially on the ups days.
Check out the volume bars over here. Whereas over here, we did have some good strong volume, but it started to weaken as we were moving higher.
And we just went parabolic over here. That’s the problem with a stock like Alibaba. When the price goes parabolic here, it’s vulnerable to some sharp moves to the downside. And if that continues to happen, like it did in October, we had a couple of gap downs in October, it fell out of bed, and it was just annihilated back in November when the markets in the US here were strong.
MACD is on a buy signal over here.
But relative strength is overbought
Relative strength is overbought. Overbought – remember something – it doesn’t necessarily mean we need to short or sell the stock. It means we need to be on a warning for a bit of a pullback. I think that this stock has been demonstrating – for the past month or so – that pullbacks have been good buying opportunities to add the stock.
The Chinese stock market has been fairly strong when it’s been open. This month in February it was closed for about a week during the Lunar week, and now it’s back open again, so we may see a little bit more upside here with Alibaba. Look for about $117 or so before it cools off. And then maybe a pullback to where it is right now – about $107-110. And probably shoot higher again.
I think earnings will be coming out in about a week or so.
So, take a look at Alibaba. Thanks so much for watching everyone and I’ll see you guys next time.
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