Alibaba Group Holding Ltd (BABA) Is in New Bull Territory

Alibaba Group Holding Ltd (NYSE:BABA) have rallied about 16% over the past month, most of it a result of a strong post-earnings pop. Over the past couple of weeks, however, BABA stock has consolidated in a constructive way, and now it looks ready to break even higher in the not-too-distant future.

Beat the Bell: Alibaba Holding Group Ltd (BABA) stockOn Aug. 8, I offered a trade idea and some perspective on BABA stock, saying that shares were itching to break into the high $90s. That price target was reached, and a successful trade was booked.

But as we’ll see on the following charts, Alibaba stock has another leg higher in it.

When Alibaba reported its latest earnings on Aug. 11, it beat expectations on the top and bottom lines, and also reported strong growth in mobile shopping. Revenues were up nearly 60% year-over-year — an impressive feat by any standards. As a result, traders and investors were quick to rally BABA stock to fresh 52-week highs.

BABA Stock Charts

On the weekly chart that stretches back to Alibaba’s initial public offering in September 2014, note the violent breakout BABA stock staged earlier this month. Alibaba cleanly broke past both the horizontal and diagonal resistance lines, which, so you know, was also accompanied by plenty of volume.

With the breakout trade behind us, the next trade to focus on is what I call “continuation buying,” and for that, we need to switch over to the daily chart.

Alibaba BABA stock chart weekly
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Psychologically, most traders and active investors I have worked with have an easier time trying to capitalize on “breakout” trades as compared to “continuation buying” trades. The reason? Traders often think they have already missed the move after a big breakout. But in reality, if the breakout was truly forceful, a bigger move higher (through a multi-month lens) might have just begun.

On the daily chart, see that after two days of breakout rally mode, Alibaba stock began to consolidate in a tight pattern for the rest of the month.

Whether we label this pattern a bullish wedge or flag is irrelevant. If the early August breakout rally was truly significant, then following this multi-week consolidation phase, BABA stock has a good chance of seeing a further lift.

Alibaba BABA stock daily
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Active investors and traders could consider buying BABA stock upon a daily close above $97 for an initial lift toward $105. Respect any significant bearish reversal days as stop-loss signals.

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