BABA Elliott Wave Analysis (28-12-20)

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BABA Elliott Wave Analysis (28-12-20)

 

Here’s a short and quick breakdown of the BABA Elliott Wave analysis leading up to the 28th of Dec 2020.

 

From a longer term perspective of the BABA Elliott Wave Analysis weekly chart, we can identify that BABA began its initial growth protectory in the 3rd quarter of 2015.

 

Presumably, this shall be the start of our Elliott Wave count as wave ((I)) in orange.

 

From 2016 to the mid of 2018, BABA began to grow rapidly into the Tech / E-Commerce giant we know today.

 

This extended period of growth can be viewed as an extended wave ((III)) in orange.

 

And from 2019 up to the 3rd quarter of 2020, we view this last leg as an “Ending Diagonal” right up to BABA’s all time high at $319.

 

From the charts, BABA has seemingly completed the primary wave 1 in white around the end of October 2020.

 

 

 

Steep Sell Off

 

The current sell off is attributable to the recent outspoken behavior of its founder Jack Ma.

 

His outlandish criticism of the Chinese financial system has definitely incurred the wrath of the Chinese authorities.

 

BABA’s shares slumped around 14% on Thursday after the Tech / E-Commerce giant said it has received a notice of investigation from China’s State Administration for Market Regulation.

 

The notice states that the State Administration for Market Regulation has commenced an investigation pursuant to China’s Anti-Monopoly Law.

 

Although the share price has already plummeted, I feel that the repercussions may be far from over.

 

 

 

Depth Of Corrective Phase

 

Currently, our BABA Elliott Wave Analysis seems to indicate that it is in the midst of a corrective phase in the larger degree.

 

The question is how deep will this correction be?

 

The charts are potentially showing an A-B-C correction holding support at the Fibonacci 38.2% zone.

 

Personally, I feel that this corrective structure is too fast and too steep for my liking.

 

 

 

Favorable Scenario

 

In the best case scenario, the Chinese authorities will impose a routine “Slap On The Wrist” punishment on BABA.

 

Likely resulting in a “Significant” monetary fine, but one that most definitely will not break the bank for BABA given its strong financial status.

 

And hopefully the authorities will let rest and close the chapter on this matter.

 

If this is the case, then there is a high chance BABA’s share price will likely bounce off the 1st zone of defense at the 38.2% zone and continue its original trajectory upwards.

 

However, in terms of time and size symmetry in the context of our BABA Elliott Wave analysis, the magnitude of this current ABC correction might not be enough to correct the entire primary wave 1 in white.

 

 

 

Unfavorable Scenario

 

In the unfavorable case scenario, the Chinese authorities will begin further antitrust investigation into the entire Alibaba Group and clamp down on its operations.

 

Making it an “Disciplinary” example for the other Chinese billionaires or companies that dare to show a lack of respect.

 

If this happens, it could potentially put a damper on the E-commerce giant’s future short to mid term growth prospects.

 

And cause its share price to plunge even further.

 

Viewing it from the BABA Elliott Wave analysis perspective, this will likely result in a prolonged correction.

 

The more likely scenario in this case would be the formation of a deeper W-X-Y corrective structure.

 

With prices dropping further into the 50% to Fibonacci 61.8% zone.

 

The potential larger WXY corrective structure is likely going to be more extended but also more plausible in terms of a valid Elliott Wave structure.

 

 

 

Conclusion

 

Let’s cut to the chase, and get to the gist of the matter.

 

From a fundamental perspective, BABA is a strong company with enormous growth potential and a strong business moat.

 

The immediate question on most of our minds is whether BABA is ripe for the picking using our BABA Elliott Wave Analysis.

 

In my humble opinion, if an investor is seriously interested in owning the shares of a great company like BABA.

 

Then, they should “Split” their intended allocated capital and buy in 2 tranches.

 

Like many fellow investors, I personally feel that the current ABC correction presents a “Opportunity” that is hard to turn down.

 

Serious investors should at least allocate half of their bullets and not let this opportunity slip by.

 

If BABA share prices drop further and lands in the “Golden” Fibonacci Zone, one should unleash the other half bullet.

 

Personally, I would definitely love to own a portion of this tech giant and I am keeping my fingers crossed.

 

Hopefully the authorities will be more lenient in their disciplinary approach towards their most famous tech company.

 

Please DYODD before taking any trades based on our blog’s Elliott Wave analysis.

 

 

 

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Comments

  1. Chris

    This is the first major correction it ever had, it will most likely be in the form of Zigzag and will at least reaches 50% Fib ratio (190.00 area) or even down to 62% (160.00 area) to complete wave 2nd. I think wave A is terminated at 38% and it is a 5 wave impulse. I think it bounces from 38% up for the B leg and plunges down more to complete the C at either 50% or 62% area. This is simply just my own opinion.

    • Hi Chris, thanks for sharing your thoughts.

      I agree with you that this correction will likely retrace much deeper.

      Most probably it end up in the Fibo retracement zone of 50%-61.8% before we will see any favorable upturn for BABA.

      However, I have a slight variation of the labelling of this corrective structure.

      In my humble opinion, I am viewing it as a larger W-X-Y correction.

      The current steep drop looks like a 5-3-5 zig zag completing the first W leg.

      While the recent share back announcement might trigger some positive sentiments and result in a shorter term rally for the X-Leg, perhaps to the Fibo retracement 38.2%-50% zone of the first leg.

      Personally, I believe it might just be a dead cat bounce and price will drop further to the Fibo Golden Zone to complete the final Y Leg.

      Hopefully when that happens, it will coincide with the 200 moving average for further confluence.

      Glad to have share a similar view on this corrective structure.

      Trade safe and prosper.

      Cheers DL

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