Alibaba Group's 8.19% Surge Driven by Bullish Reversal Pattern and 50-Day MA Crossover

Candlestick Theory

Alibaba Group’s recent 8.19% surge reflects a strong bullish reversal pattern, with the price surging from a prior consolidation range near $163 to a new high of $176.44. Key support levels are identified at $162.8 (prior low on 2025-09-23) and $158.04 (2025-09-15), while resistance appears at $175–$180.16 (2025-09-24 high). A potential bearish divergence emerges if the RSI fails to confirm the price high, but the strong volume accompanying the rally suggests conviction in the breakout.

Moving Average Theory

Short-term bullish momentum is reinforced by the 50-day MA crossing above the 200-day MA, indicating a potential uptrend. The 50-day MA currently hovers near $155–$160, while the 200-day MA sits at $130–$140. Price action above both averages (currently at $176.44) confirms strength. However, the 100-day MA at $145–$155 may act as a dynamic support if the rally stalls, suggesting a multi-timeframe alignment favoring buyers.

MACD & KDJ Indicators

The MACD histogram shows a recent positive divergence, with the line crossing above the signal line, signaling short-term bullish momentum. The KDJ indicator’s %K line reached overbought territory (>80), aligning with the RSI’s overbought condition (>70). While this suggests a potential pullback, the absence of bearish divergence in volume (which spiked during the rally) implies the uptrend may persist. A bearish crossover in KDJ or MACD would signal caution, but confluence with candlestick patterns is needed for confirmation.

Bollinger Bands

Volatility has expanded significantly, with the price nearing the upper Bollinger Band ($175–$180). The bands’ prior contraction in early September (e.g., 2025-09-10) acted as a prelude to the breakout. Price proximity to the upper band suggests a potential reversal, but the strong volume and MACD alignment favor continuation over correction. A break below the middle band ($165–$170) would invalidate the bullish case.

Volume-Price Relationship

The recent 8.19% gain was accompanied by a surge in volume (52.6 million shares), validating the move’s legitimacy. However, volume has since tapered, which may indicate waning momentum. If price consolidates without a corresponding volume spike, it could signal a lack of follow-through. Conversely, sustained volume during a test of prior resistance ($162.8) would reinforce the breakout’s validity.

Relative Strength Index (RSI)

The RSI has entered overbought territory (>70), a classic warning of potential exhaustion. However, in strong trends, RSI can remain overbought for extended periods. A close below 60 would signal a bearish shift, while a sustained level above 70 suggests continuation. Divergence between RSI and price (e.g., lower highs in RSI despite higher price) would add caution, but current alignment with volume and candlestick patterns leans toward trend persistence.

Fibonacci Retracement

Key Fibonacci levels from the recent low ($84.42 on 2024-12-03) to the high ($180.16 on 2025-09-24) include 50% at $132.26 and 61.8% at $108.34. The price currently tests the 38.2% retracement level ($132.26), which may act as a dynamic support/resistance. A break above $175 would target the 23.6% level ($157.29), while a failure to hold $162.8 could trigger a retest of the 50% level.

Backtest Hypothesis

A strategy buying Alibaba Group when RSI exceeds 70 and holding for five days yielded a CAGR of 8.94%, underperforming the benchmark’s 64.09%. The low maximum drawdown (0.00%) suggests minimal risk but highlights the strategy’s inability to capture sustained trends. This underperformance likely stems from RSI’s frequent overbought readings in strong uptrends, generating false signals. Integrating volume confirmation or longer holding periods (e.g., aligning with 50-day MA trends) could improve results, as the current approach lacks confluence with other indicators like Bollinger Bands or KDJ.