BABA breaks back below 100-day moving average
Alibaba Group Holding Limited (BABA) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
Moving lower for the 3rd day in a row, BABA ended the week -1.95% lower at 199.70 after tanking $12.46 (-5.87%) today on high volume, strongly underperforming the S&P 500 (0.24%) following today's earnings report. This is the biggest single-day loss in over two months. The last time we've seen such an unusually strong single-day loss on May 1st, BABA lost -1.71% on the following trading day. Ending with a weak close near the low of the day sets a bearish note for the next session.
Daily Candlestick Chart (BABA as at May 22, 2020):
BABA reported earnings of $1.3 per share before today's market open. With analysts having expected an EPS of $0.87, Alibaba Group Holding Limited beat market expectations by 49.4%. The company's last earnings report was released on Feb. 13, 2020, when Alibaba Group Holding Limited reported earnings of $2.61 per share beating market expectations by 17.0%.
Friday's trading range has been $5.89 (2.9%), that's slightly above the last trading month's daily average range of $5.62. Weekly volatility is also higher, being way above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for BABA.
One bearish candlestick pattern matches today's price action, the Black Candle.
Prices are trading close to the key technical support level at 198.56 (S1). The market closed back below the 100-day moving average at 206.36 for the first time since May 15th.
The stock shows weakness in the short-term (in accordance with its long-term downtrend) with only the medium-term trend still being bullish.
Selling might accelerate should prices move below the close-by swing low at 194.03 where further sell stops could get triggered. As prices are trading close to May's low at 189.53, downside momentum might speed up should the share mark new lows for the month.
Among the 13 market conditions that our pattern recognition engine identified today, the statistics for the Stock Earning Report based market condition "Trading Day post strong Earnings Report" stand out. Although it is usually interpreted as neutral, it has actually shown to be bullish for Alibaba Group. Out of 17 times, BABA closed higher 64.71% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after six trading days, showing a win rate of 58.82% with an average market move of 0.33%.