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Alibaba Group Holding Ltd: BABA Stock Is Locked and Loaded

China's online retailer BABA looks set for a year-end rally

Shares of online commerce company Alibaba Group Holding Ltd (NYSE:BABA) rose along with the broader U.S. stock market in Wednesday’s trading session after the Federal Reserve unanimously decided to hike interest rates for the first time in about eight years.

Beat the Bell like the S&P 500, BABA stock also has not yet been able to overcome its multimonth lines of resistance, but it sure is doing its best of coiling up in a technically sound manner that ultimately stands a good chance of breaking higher either into year-end 2015 or into early Q1 2016.

To be clear, Alibaba stock is not the S&P 500, and thus in my opinion should not be played as a proxy to the broader market. And while BABA stock is still lower by about 19% year-to-date and off more than 22% year over year, it does have some qualities of the “FANA” stocks — Facebook Inc (NASDAQ:FB),, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) — in that it is one of the few believable single-company growth stories out there known to the investing public.

While concerns around the Chinese economy and arguably some transparency issues held back Alibaba stock this year, the underlying growth story in my mind is strong and a compelling reason for the stock to work higher over the longer-term.

Alibaba Stock Charts

On the chart since Alibaba’s initial public offering from September 2014, we see that the defined horizontal line has continuously acted as support and/or resistance. The line comes in around the $86 area and is not far from the stock’s closing price on Wednesday.

Also noteworthy is BABA stock’s price action since late this spring. In May, Alibaba shares made a significant lower high and soon after began dropping below the aforementioned black horizontal. This lower high also ultimately formed the red-dotted diagonal line of resistance, which BABA managed to break back above in late-October.

Alibaba BABA IPO
Click to Enlarge

Also note that the stock’s all-time lows in late September just marginally undercut its August lows and thus shook out a few last bears as stops were triggered before setting foot on a steep rally into early November. From here and in the bigger picture, BABA stock must clear horizontal resistance and stay above for it to stand a better chance to move toward the $100 mark, which ultimately would also fill the still unfilled down-gap from January.

On the daily chart, we see that Alibaba stock has been consolidating in a tight manner for the past few weeks, which is now allowing us to draw a defined line of resistance using the summer highs.

BABA stock daily
Click to Enlarge

Very simply, should BABA stock be able to clear the $85 area, then from a momentum perspective, upside into the mid- to high $90s should open up.

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