Alibaba Group Holding Limited (BABA) has ascended into market leadership in 2017, posting a series of new highs while rewarding shareholders with outsized returns. It has also been bulletproof in recent weeks, holding like glue to rally highs while broad benchmarks lose ground due to growing geopolitical risk. This resilience has forced market technicians and the spreadsheet crowd to collectively wonder if it's too late to buy Alibaba shares and get in on the good vibes.

Buying high in a momentum rally carries greater risk than buying pullbacks, sell-offs or deep lows within trading ranges, but the strategy offers more generous rewards for getting it right. Even so, it is a tricky proposition with Alibaba because big tech and China plays can move in opposite directions for long periods due to that nation's unique status, which now faces the additional challenge of a U.S. administration seeking significant trade barriers. (See also: Alibaba Seeks Upscale Clientele for Goods, Services.)

BABA Weekly Chart (2014 – 2017)


Alibaba stock came public on the U.S. exchanges in September 2014, opening in the lower $90s and trading as high as $99.70 in its first session. It then eased into a pullback that found support in the low $80s a month later, ahead of a strong trend advance that continued into the November high at $120. Aggressive sellers took control into 2015, generating a decline that cut through the opening print of the first trading day in February.

Selling pressure continued into September 2015, dropping the stock to an all-time low at $57.20, where it turned higher in a double bottom reversal that encouraged strong buying interest into January 2016. That impulse reversed in the mid-$80s and dumped into a February retest at the 2015 low, completing a larger-scale bottom and bounce that stalled at January resistance in April. (For more, see: Alibaba Aims to Become World's Fifth Largest Economy.)

The stock broke out above range resistance in August, entering a more dynamic uptrend that tested the 2014 high in the fourth quarter. Sellers emerged at that level, triggering a decline to support at the 50-week exponential moving average (EMA), followed by a powerful buying wave that triggered an April 2017 breakout. That uptick intensified after the company raised guidance at a June investor event, triggering a 17-point up gap that posted heavy volume.

The weekly stochastics oscillator entered a buy cycle in November 2016 and has stuck like glue to the overbought level since that time, signaling a very strong uptrend. The monthly indicator flipped into buy mode in March 2017, predicting at least six to nine months of relative strength, and it has now reached the overbought level. Taken together, these high bullish technical readings favor continued upside into the fourth quarter. (See also: Alibaba Is Growing Faster Than Most Thought.)

BABA Daily Chart (2015 – 2017)


The base breakout and rally wave into October 2016 stalled just 10 points below the 2015 high in the triple digits, while the subsequent pullback completed the handle in a modified cup and handle breakout pattern. A Fibonacci grid spread across the rally wave that started in December 2016 shows little alignment when using the latest high, suggesting that the current uptick still has not posted the final high.

The big June gap between $125 and $142 may be instructive in targeting the final high in the series of higher highs because it shows the technical features of a continuation gap, which routinely prints at the midpoint of a dynamic trend wave. Applying this Elliott wave logic, the current uptrend may not top out until it reaches harmonic resistance in the upper $170s, or about 25 points above this week's action in the mid-$150s. (To learn more, see: Elliot Wave in the 21st Century.)

The Bottom Line

Alibaba is holding near an all-time high while U.S. tech stocks struggle due to rising geopolitical risk. Highly bullish weekly and monthly relative strength cycles predict that the upside will continue, perhaps reaching $177 to $180, where the June gap would align with the 50% level of the rally wave. (For additional reading, check out: Alibaba vs. Amazon: A Tale of Two Growth Stories.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>

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