BABA surpassed all my original price targets for a larger top, which were way back at the $115-$118 zone in May. It’s obviously up another 50+% since… Hence, why I always say I am wrong till proven right and this one has particularly made a very unexpected run higher. Since my partner at NorthPost Partners asked me about BABA today because of increased put buying activity; it was time for me to thoroughly re-assess the charts.
Let’s start with the monthly chart, and as you can see, BABA hasn’t had 1 single down month since the start of this year. Hence, the entire move up off the December low is simple part of one single wave up. If we then look at the (monthly) RSI5, it is right now at a value of almost 95. It doesn’t get much higher than that. Often 3rd of 3rd waves, in this case (green) minor 3 of (red) intermediate-iii of (black) major-3 have such peak RSI-values because these are the strongest waves. Price is riding the upper bollinger band but has almost opened and closed entirely above it. Although this all shows strength, it does also mean price is going too far too fast.
If we then zoom in on the daily chart, we can do some micro-counting for the entire (green) minor-3 wave, and although it’s subject to interpretation, this count fits pretty well. I’ve no upside targets for all of minor-3 but the current advance of the early-August low surely looks like a 5th wave.
Another key component of the daily chart is all the rising trend-lines: the bulls have many, solid, lines of defense now. If minor-3 is close to topping we should see a 23.6-38.2% retrace ideally, which would bring price back to the $150 zone +/- 5. That’s also around the (grey) minute-iv level; and not too surprising as 4th waves often retrace back to the prior 1-degree lower 4th wave.
Please note that once minor-4 is done, we still have many 4th and 5th waves to unwind; and BABA is by no means done or a sell for those who are long from much lower price levels and who can stomach and weather a few down weeks.