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Fan Yang

Alibaba (BABA) was in a Bullish Breakout, But its Not Very Convincing

Alibaba $BABA has been consolidating, but broke above a key resistance around $178.80 last week. However, the breakout was not strong and unconvincing.

Alibaba Daily Chart

(click to enlarge)

Pullback into Bearish Correction?
- As we can see on the daily chart, $178.80 was a common resistance since late July.
- Last week, price broke above this resistance, and edged up to $184 before retreating. 
- This week, price started to pullback under $180. 
- This could very much a failed bullish breakout. Price action certainly looks that way. Furthermore, RSI held under 60 for the most part. If it pushed to 70, then I would be more convinced of the bullish breakout.
- Instead I expect a deep pullback to test the $164-$165 area. 
- If this area does hold as support, then I would regain some confidence for the bullish outlook.
- However, a break below $164 would signal more bearish correction in late 2019. 
- $150 would be the next critical support for BABA. 
- I have some dry powder at $150 and $135 as I rotate out of my current exposure around $179.50.

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