Alibaba Group (US: BABA) on our report dated 1^st September, we were positive that wave 5 would go beyond US$300.00 and terminate near US$305.67. However, prices reverse sharply near 200.00% extension level and rebounded at US$268.00 according to our strategy plan B. Based on the wave analysis, we believe that Alibaba will have further correction to the downside near support zone 1:

1. Alibaba Holdings 5-wave has complete after the stock reverse at US$299.00, missing by US$1.00 to US$300.00.
2. Subsequent sell-down correction sees prices forming a long bullish hammer at US$268.00 support level. However, prices continued testing of US$268.00 for 4 periods weaken the support level and thus, the possibility of the stock heading downwards to form wave C is high.
3. Bearish flag formation is seen from wave A to B and it is indicative of a continuation of a bearish downside.

*The technical call is valid for 3 weeks only.

*Should the support zone 1 be invalidated, the next possible support region will be at US$212.68-US$218.58. Forming a stronger downside impulsive wave.  

CHART LEGENDS

Moving average

Red dotted line = 200-day moving average

Blue dotted line = 50-day moving average