BABA SHORT

BABA increased +160% since it broke out of a cup with a handle pattern in 2016 July. Its RSI started decreasing a year after, but its price continued to increase until this January, signalling a bearish divergence. It seems to be forming a head and shoulders pattern on the weekly chart, we'll see if it can form the right shoulder. On the top, it formed a dark cloud cover candlestick formation, with 2 weeks down on considerable volume. It started to move downward in a channel and so far the 164 level acts as a support and the neckline of the forming H&S pattern. If it breaks, it could correct until the 133 level (-20% from 164), which would be around 50% of the upward trend since it broke out in the beginning of the move. The upcoming strongly unfavorable earnings estimate could also be a sign of weakness.