Stop! Do not buy Alibaba yet

• Posted by Greg Harmon
• on April 4th, 2016

Alibaba may be ready to rival Amazon for king of the online retail space. And there has been some excitement about the last few months of positive price action in Alibaba ($BABA) stock. But even the CEO Jack Ma agrees with me, it is not time to buy the stock yet.

The story comes from the chart below. Since the company went public in September 2014 the stock has spent a lot more time below its first day price than above it. After a peak in November the stock has made a series of lower lows and lower highs. This defines a downtrend. But that changed in February, when it stopped falling and created its first higher low.

Short term traders may have bought at that time and have had a good run higher. For the intermediate or position trader though it needs to confirm with a higher high to be considered for a purchase. This will not happen until it moves up over the November 2015 bump. Will it get there? The picture is mixed on that. The price is at the falling trend resistance line now. A push above that would go along way towards answering yes.

The momentum would need to pick up as well. So far no bounce has been able to muster a move in the RSI above the 60 level, turning it bullish. The MACD is improving. It has crossed up and is rising, but it is also still shy of the zero line, so weak bullish. Both turning solidly bullish with a price break over falling resistance, could give a pass to waiting for a new higher high to get involved. But not yet.

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