Alibaba Group Holding Limited (BABA) shares fell nearly 3% on Monday after JD.com, Inc. (JD) announced plans to expand across the U.S. and Europe as soon as next year. JD.com CEO Liu Qiangdong believes that his company will be recognized by customers worldwide over the next 10 to 20 years, which could put it in direct competition with Alibaba and other global brands such as Amazon.com, Inc. (AMZN) and Alphabet Inc. (GOOG) subsidiary Google.
Alibaba reported revenue that rose 60.7% to $8.29 billion last quarter – beating consensus estimates by $440 million – and net income of $1.29 per share beat consensus estimates by 26 cents per share. Despite these strong financial results, the market has been somewhat ambivalent about the stock over the past month, particularly after its $7 billion bond sale that brought its cash reserves to $22 billion. (See also: Alibaba Group Sells $7B Worth of Dollar Bonds.)
From a technical standpoint, the stock broke down from trendline support at $172.00 to S1 support at $169.88. The stock may have experienced a double top in the process, which could suggest a prolonged move lower over the coming weeks. The relative strength index (RSI) fell near oversold levels at 32.07, but the moving average convergence divergence (MACD) accelerated its bearish downtrend moving into December.
Traders should watch for some consolidation above S1 support levels over the near term given the oversold RSI conditions. If the stock breaks down from S1 support at $169.88, traders should watch for a move to S2 support at $162.69 given the accelerating downtrend. If the stock rebounds from S1 support, traders should watch for a move back above upper trendline resistance to the 50-day moving average at $190.20. (For more, see: How Alibaba’s Soaring Wealth Created 10 Billionaires.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.