Alibaba Group Holding Ltd (NYSE:BABA) took a pause on Friday after the sharp rally on Thursday. The stock ended the last trading session of the week with a minor gain of 1.23%, sustaining the higher levels. The 10 percent rally on Thursday came on the back of a forecast beating fourth quarter result. The company reported a net income of $467 million or $0.18 per share. The revenue reflected an increase of 45% to $2.81 billion against the expected figure of $2.77 billion. The boost came from the sharp 27% jump in mobile transactions, which accounts for 51% of the company’s overall transactions. The company also reported a change in the top spot as Daniel Zhang, chief operating officer, replaced Jonathan Lu as the CEO.
Technically, Alibaba Group Holding Ltd (NYSE:BABA) still remains in the grip of the bears despite the sharp bounce following the encouraging result. To understand that clearly, one must check the entire price action since its listing in October 2014. Just after its listing, the stock corrected a bit due to a bout of profit booking by the IPO subscribers but soon enough it launched a tremendous rally that took the stock from $83 to $120 in just 5 weeks. Then the bears took control as the normal and healthy correction after such a huge rally didn’t stop and ate up all the gains made, registering a new low actually.
The price action in the last 8-10 weeks shows a sideways phase, neatly contained in a channel as shown on the chart attached. More importantly, despite the clear deceleration of the bearish momentum, the stock is yet to close above that channel boundary. The bulls would like to point to the first higher high registered in the last few months but unless the resistance area around $90 is broken above, the downside risk remains.