Chinese internet e-commerce giant Alibaba Group Holdings (NYSE 🙂 just reported operating results ahead of the start of the US session. , the Hangzhou-based company:
"Beat quarterly revenue and earnings expectations on Thursday as core commerce and cloud computing businesses benefited from a shift to online shopping and working from home as a result of the coronavirus crisis."
Investors are doubtful surprised at BABA's results, given that the company had already seen pre-pandemic growth in mid-May, and COVID-19 lockdowns and corporate closures have been a boon for online retailers. Shares of Alibaba, which closed at $ 260.59 yesterday, are up + 20% YTD.
But a variety of headwinds, including resurgent US-China trade and diplomatic quarrels, ongoing coronavirus outbreaks both in China and globally, and the White House threat of tougher controls on Chinese companies complying with US stock markets are listed, could put stocks under pressure. even after his earnings have increased.
What does the trading pattern suggest about the stock's next move?
The stock is within a symmetrical triangle since its highest point on June 19. The even distribution of the pattern between supply and demand, causing the highs to fall as sellers lower the price of offers, while lows rising as eager buyers raise their bids – only to converge somewhere in the middle – shows that traders are unsure about the direction. of the stock.
This uncertainty is amplified when such a pattern occurs right before profit, suggesting that it is the event traders are looking for to help them make a decision on how to proceed.
The neutral pattern placement of the stock on the chart – above the upward trend line – does provide the argument for better chances of an upward breach, in the direction of the underlying trend. In addition, the RSI managed to climb back above the uptrend line after spending three days below it.
Still, the momentum indicator shows a negative divergence as it has fallen lower, while price remained higher, creating a downward channel for momentum, which may mean prices could turn lower.
But with revenues exceeding expectations, the next leg could be an upward breakthrough. Should this happen, it would trigger a bullish chain reaction. However, if the guidelines fall short, or provide no reason for exuberance, a dip can push the price to the bottom of a likely bullish pattern, or even the uptrend line – providing a buying opportunity within the uptrend.
Trading Strategies
Conservative traders would wait for an upward breakout or return to the uptrendline and wait for evidence of accumulation. The completion of the pattern involves a minimum of 3% price penetrations in a minimum period of 3 days, preferably including the weekend, and then waiting for a return move to retest cartridge integrity.
Moderate traders are also likely to wait for either an upward penetration, or be content to return to the bottom of the pattern long after signs of support. A moderate filter to avoid a bull trap can be satisfied with a 2% move, over a two day period. Return moves are welcome for buying dips, not necessarily proof of trend.
Aggressive traders can also wait for the completion of the pattern or a return to the bottom. The required upward penetration would be a minimum of 1% with a close above the pattern. A return to the bottom can lead to long positions, without waiting for signs of a rebound.
Trade Sample – Aggressive Lung Positions
Admission: $ 268
Stop Loss: $ 264
Risk: $ 4
Target: $ 288
Reward: $ 20
Risk: Reward Ratio: 1: 5
Note: This is a trade monster, not a prophecy. Nobody knows what will happen. Trading is about trying to increase one's odds of winning so that one's actions will be profitable over time – rather than per trade. This trading example is generic. It is not tailored to a specific person, budget, temperament, or time frame.
