Alibaba Group Holding Ltd. (BABA)

1:40 p.m. New York time

What’s happening now? BABA dropped off from its Tuesday high, 174.15, with an opening gap this morning.

What does it mean? The price has completed a 1st wave up within an upward correction a long downtrend and is now falling in a downward correction within the upward correction.

What’s the alternative? The low of 152.80 on August 23 marked the end of a major decline, and the present upward movement is the beginning of a major uptrend that will eventually move above the October 2020 high of 319.32.

Chart note. The subscripts in the wave labels are relative to one another and are unrelated to the Elliott wave theory nomenclature of wave degrees.

What does Elliott wave theory say? By my principal count, the present decline is wave 2 {-4} within uptrending wave A {-3}, the first wave of the wave 4 {-2} upward correction that began on August 23. Fourth waves tend to be shallow, so I don’t expect a great deal of upside from this one. Wave 4 {-2} will be followed by a 5th wave of the same degree that will push the price to below 152.80, the August 23 low.

By my alternative count, the August 23 low marked the end of the correction, and the rise from August 23 is the beginning of a new wave to the upside that will eventually break above 319.32, the all-time high for BABA set on October 27, 2020

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, August 25, 2021

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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