Why Alibaba Stock Could Hit $120 (BABA)

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Shares of Alibaba Group Holding Ltd (NYSE:BABA) are higher by a stellar 20% year-to-date despite largely meandering sideways since late January. Like a great many momentum and growth stocks, BABA stock got an early vote of confidence by traders and investors alike out of the gates in January, then slipped into a constructive consolidation phase.

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However, on Monday, March 13, Alibaba shares showed signs of life. The stock rallied 1.7% and marginally broke out of its two-month slumber.

Traders and active investors should take notice.

When I last discussed shares of Alibaba on Jan. 20, I offered two ways to trade the stock following the Jan. 24 earnings report. Specifically, I said that a gap and hold higher after earnings would offer a buying opportunity just like a gap lower after earnings could offer a trade to the downside. On Jan. 24, following the earnings report, BABA stock gapped higher and above the $98 I had laid out as a buying signal.

By day’s end yesterday, shares closed around $105.18. Thus, they’re well on their way toward my first upside target around $108.

BABA Stock Charts

Note that in June 2016, Alibaba stock successfully pushed pasty diagonal resistance that (lower purple dotted line), which by September had led to a near-retest of its previous all-time highs from late 2014.

BABA stock chart weekly view
Click to Enlarge

The stock then pulled back but in late December found support at a critical technical area. This area was made up of the 50-week simple moving average (yellow, also roughly equating the 200 day moving average), as well as a 50% retracement of the entire rally from the February lows up to the September highs.

Through this lens and time-frame, BABA ultimately has a well-defend upside price target around the $120 mark. This upside price target would be a result of a simple Fibonacci extension move and also nicely lines up with the 2014 highs.

On the daily chart, we see that late-December 2016 bounce off the 200-day moving average (red) more clearly, which led to the early 2017 rally.

BABA stock chart daily view
Click to Enlarge

After trading in a narrow sideways range since late January, BABA stock now looks ripe to retest the September 2016 highs around $110 as a next upside target. This could ultimately be followed by the aforementioned $120 upside target through a multimonth lens.

Any significant bearish reversal would call off the bull trade until a next bullish reversal appears.

Looking at a large growth stock such as Alibaba through a technical lens can speak volumes about investor risk appetite. After topping out in late 2014, following the initial public offering, BABA stock endured plenty of pain while the world economies showed slowing economic growth.

But when the U.S. stock market bottomed in February 2016, BABA stock also found a more sustainable bid — one that now looks to have plenty more upside.

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Article printed from InvestorPlace Media, https://investorplace.com/2017/03/why-alibaba-holding-group-ltd-stock-could-hit-120-baba/.

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