Big kid for Alibaba Group! The action has fallen by 75% since October 2021! Gilles Leclerc offers you a trading plan to take advantage of it and bet at a lower cost on the rise in the price.
The action Alibaba Group (US01609W1027 – BABA) is in sharp decline: it has fallen -75% since its high point last October (red arrow on the graph below).
The stock’s descent into hell faithfully followed a downtrend line (in orange). At each contact with this trendlinethe “big hands” took the opportunity to drive the point home (orange arrows).
But the trend is reversing
Buyers started accumulating positions in mid-March. Volumes exploded (yellow dot), which gave rise to a first rebound.
The action then returned to test the support zone (“S”) twice (green arrows). With each time buying volumes (green dot) to relaunch the action and therefore validate the “S” support which transits towards $80 (green horizontal rectangle).
The highlight being that at the beginning of the week Alibaba has just given a potential buy signal by finally breaking this bearish slant (green dot) – hence this trade plan that I am sharing with you today.
Before going any further, it should be noted that the average consensus target of the (many) analysts who follow the case stands at $150.
This corresponds to a graphical resistance (blue horizontal rectangle on the graph below), confirmed in view of the impacts (white arrows).
In short, $150 as a target for analyst firms still represents 45% upside potential.
For my part and given the current market conditions, I will remain much more modest by aiming for $128 – initially.
A bit of graphical analysis…
Zooming in on Alibaba’s recent journey, we spot a “W” formation (in orange).
This is one of the most classic reversal figures.
You know its principle: wait for the break in its water line to take a position. And the theoretical objective corresponds to the amplitude (green boxes and blue vertical arrows).
In clear and decoded: buy on break of the water line – so if close above $105. And aim for the target at $128. That is a potential of around 20%.