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If You're Trading Alibaba As The Stock Surges, Here's How To Plan Entries And Exits

Alibaba Group Holdings, Ltd (NYSE: BABA) gapped up over 11% higher on Friday after breaking up from a falling channel pattern on Wednesday, which Benzinga called out two days prior.

Benzinga · 04/29/2022 12:21

Alibaba Group Holdings, Ltd (NYSE:BABA) gapped up over 11% higher on Friday after breaking up from a falling channel pattern on Wednesday, which Benzinga called out two days prior.

Although Alibaba looked set to trade higher from a technical standpoint, the gap up open was caused by news the Chinese government plans to hold a symposium with its home-based big tech firms beginning on May 1. Two sources who spoke to the South China Morning Post said the intention of the Chinese government is to inform the tech giants that regulators will end the intense crackdowns that have plagued the tech stocks for many months.

Alibaba suffered a 73% drop between the Oct. 27, 2020 all-time high of 319.32 and Monday, when the stock hit a low of $81.80, but since then has rebounded about 24%. Although Alibaba’s downtrend has now been negated, the stock has not yet confirmed an uptrend but if it does, Alibaba will offer a solid entry for bullish traders who aren’t already in a position.

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The Alibaba Chart: When Alibaba broke up from the falling channel pattern it was on higher-than-average volume, which indicated the pattern had been recognized and a large move to the upside was in the cards. On Thursday, Alibaba closed the trading session at its high-of-day, which indicated the stock would trade higher again on Friday.

  • The gap below may concern some bullish traders, because gaps on charts fill about 90% of the time. If Alibaba is about to confirm a new uptrend and eventually fall down to form a higher low, bullish traders can watch for Alibaba to print a reversal candlestick, such as a doji or hammer, toward the bottom of the gap.
  • If Alibaba closes the trading session flat or near the low-of-day, it will print a doji candlestick or shooting star candlestick, respectively, which could indicate the high is in and the stock will trade lower on Monday. If Alibaba closest he trading session near its high-of-day price, it could indicate higher prices will come before the eventual retracement takes place.

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See Also: Alibaba's March Quarter Earnings Estimate Falls By Over 20% Over 3 Months: What You Need To Know