Stock of the day: Alibaba

Wednesday was great for Chinese stocks. The reason wasn’t the FED’s rate hike though. The reason was inhouse – comments from Chinese officials about supporting Chinese companies listed overseas and in general acknowledging the importance of the financial market. No details were mentioned but that was enough for the traders to trigger the panic buy button.

In today’s analysis Alibaba, listed in New York. The day before yesterday, we were on all-time lows at 72 USD. Yesterday, thanks to this macro info, the price surged above 100 USD. Is that a lot? When we look from the bottom yes, when we look from the top, well…it’s still not a huge rise but a good start.

Technically, yesterday’s rise was of course significant but we didn’t have any major resistances on the way. We’re approaching the major resistances now. First of all, you can see that we have two down trendlines (red and black) as long as we stay below those, the sentiment remains negative.

In addition to dynamic resistances, we have two horizontal ones (blue). The first one is the 111 USD and the second one is the 136 USD. To together, we have four crucial resistances on our way. That does not sound very encouraging for buyers, does it?

In my opinion, it’s still too early to claim that we have a buy signal here. The most important resistance is the black down trendline and breaking that resistance will be a single event, which could give us a proper buy signal. As long as we stay below, the sentiment remains negative.