Shares of Alibaba (BABA) - Get Report are at an inflection point in time and price, indicated by a rare confluence of Fibonacci indications. The weekly chart is overlaid with three Fibonacci analysis tools that are intersecting with the current level of the stock price.
First are the horizontal red lines designating the familiar Fibonacci retracement levels measured off the historic range of the stock. Second is a basic Fibonacci time line beginning on the first day the stock went public. And third is the Fibonacci arc tool made up of half circles whose radii are Fibonacci ratios drawn from a base line, in this case again, from the historical high to the low.
This week is the 34th week of trading for the stock, which is a Fibonacci timeline segment, and the current stock price, the 68% Fibonacci arc and the 38% retracement level are all intersecting in the $81 area. This is a considerable coalition of "golden ratio" confirmation.
On the daily timeframe, the indicators are a little less esoteric and more focused on pure price action. The stock has been consolidating for the last two months below the 38% retracement level and above its 50-day moving average. This month it moved above a downtrend line drawn off the highs of the last year and on Tuesday closed strongly above the retracement level. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator, and it is trending flat on the shorter timeframe, but that is in the context of the positive longer-term reading. The relative strength index is above its centerline and 21-day moving average and is breaking out of a small triangular pattern.
The Fibonacci convergence is not an indication of the future direction of the stock but rather is an indication that it is at an inflection point in time and price. But the price momentum and money flow indicators suggest that it is ready to resume its run off the February lows.
Alibaba is a long candidate after a second upper candle close above the 38% retracement level, using a trailing percentage stop under the 50-day moving average.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.