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Market Outlook

Chart of the week – Potential “Double Bottom” reversal in Alibaba (US ADR) ahead of earnings

Chart of the week – Alibaba (US ADR)

Potential “Double Bottom” reversal in Alibaba (US ADR) ahead of earnings 

Medium-term technical analysis

click to enlarge chart

Time stamped: 7 May 2021 at 6:00 pm SGT

  • The share price of Alibaba (US ADR), a China Big Tech has recorded a corrective decline of -33% over a 2-month period from its all-time high of 319.28 printed on 27 October 2020 to the “Christmas massacre” 24 December 2020 low  of 211.26. Thereafter, its share price has traded within a range of 30% to 20% between December 2020 to March 2020.
  • The lacklustre price action of Alibaba has been inflicted primarily by China government’s policies to clamp down imprudent consumer lending practises of Alibaba’s fintech division, Ant Financial that led to an abrupt suspension of its US$37 billion IPO listing on 5 November 2020 that was supposed to be the world biggest IPO on record that surpassed Saudi Aramco IPO of US$29.4 billion. After the clampdown of Alibaba’s fintech business operations, China’s regulators casted a net of anti-trust rules over China’s Big Tech firms’ monopolistic e-commerce practises and imposed a record fine of US$2.8 billion on Alibaba for monopolistic conduct on 12 April.
  • Alibaba has managed to hold above the 212.75/208.00 long-term pivotal support ahead of its FY Q4 2021 earnings release on 13 May, defined by a confluence of elements (the major ascending trendline from 3 January 2019 & a Fibonacci retracement/expansion cluster) despite the outburst of the abovementioned negative news flows. In addition since the 24 December 2021 low of 211.26, volatility of its price action has been reduced significantly and it may be evolving into a potential major “Double Bottom” bullish reversal configuration.
  • Watch the 232.40 medium-term resistance and a break above it is likely to see a further potential push up to target the 274.26 neckline resistance of the potential major “Double Bottom”. On the flipside, a daily close below 208.00 opens up scope for a multi-month corrective decline towards the next support at 189.50 (50% Fibonacci retracement of the long-term secular uptrend from 29 September 2015 low to 27 October 2020 high).


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