Shares of Alibaba Group Holding Ltd (NYSE:BABA) are higher by roughly 4% year-to-date after having sold off nearly 30% into the February lows. The comeback of BABA stock after the initial V-shaped reversal in the spring has been technically orderly. Now, Alibaba shares are sitting at a critical technical spot as we head into the company’s Thursday earnings report.
BABA stock has shown some fairly significant post-earnings moves in the past. So it’s all the more important that we get some perspective on Alibaba heading into earnings, and that we map out some risk levels.
Before looking at the charts, it’s notable that in the bigger sense, Alibaba stock has tracked the S&P 500 fairly well in 2016. Even if we get some post-earnings volatility, BABA might once again settle into a high-correlation mode with the broader market.
Since its initial public offering in the fall of 2014, BABA stock has seen plenty of gyrations. But if you hadn’t looked at the stock since then and merely looked at the price level, you could get the (false) sense that not much has transpired. So, for perspective, let’s walk through the bigger-picture multiyear chart.
BABA Stock Charts
There are three technical inflection points to note here:
- Since BABA stock made a sustained break below its initial post-IPO lows from October 2014 it has traded in a wide range between the mid $80s and the high $50s. This is to say that through this lens the stock remains within a wide trading range.
- The February 2016 lows came in marginally higher than the September 2015 lows, which is to say that BABA stock in February marked a marginally higher low, which just a few weeks ago in late-June was followed by another higher low.
- BABA stock is now coiling tightly below the simple black horizontal line that has served as support and resistance off and on since the IPO
On the daily chart, we see that after the initial explosive rally off the February lows, Alibaba settled into a multimonth consolidation phase that ultimately resolved higher a few weeks ago.
Over the past couple of weeks, BABA stockk has again settled into a smaller consolidation phase, which is taking place right below the aforementioned black horizontal resistance line. Should Alibaba push above horizontal resistance in the mid-$80s after earnings, this would mark a notable bullish statement.
I am not an advocate of trying to “game” earnings ahead of the fact, so I would prefer to jump on BABA stock through a multimonth lens if and when it manages to push past this technical resistance barrier with plenty of momentum.
If and when this takes place, a next upside target for the next few weeks (or even months) would be in the mid- to high $90s.
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