The performance of Alibaba Group ($BABA) was recently analysed using the Elliott Wave Theory. The rally from the low on 8th January 2026 formed a 5-wave impulse, which was followed by a 3-swing correction known as an ABC correction. This analysis aims to provide insight into the stock’s future movements.
On the 18th January 2026 1H chart, $BABA completed its 5-wave impulsive cycle. A subsequent corrective pullback, or ABC correction, was then observed. Buyers were expected to emerge around the $166.53 to $162.31 range. This region typically marks the conclusion of a correction and the potential start of a new bullish cycle.
Following the correction, the stock rebounded to reach new highs, reinforcing the bullish trend. It is anticipated to stay above the 20th January low while advancing in wave 3 of (3). Current targets lie in the $190-207 range.
The Elliott Wave analysis suggests $BABA continues trading within a bullish pattern. By applying this theory, traders may identify market structures and plan trades more effectively. Understanding the phases of impulse and correction aids risk management, particularly in volatile markets. Flexibility and discipline are essential as this structure develops further.
Based on the strong technical setup in Alibaba, we see the recent bounce from the $162-$166 area as a clear signal to position for further upside. The impulsive rally off the January 8th low, followed by a textbook correction, suggests the path of least resistance is now higher. This structure indicates that the move towards the $190-$207 target is likely in its early stages.
For derivative traders, this presents a compelling opportunity to buy call options. With the stock currently trading around $178, we would look at purchasing March or April 2026 calls with strike prices of $185 or $190 to capture the expected upward move. This strategy provides leverage to the upside while defining risk to the premium paid for the options.
This technical strength is supported by improving fundamentals we observed in late 2025. For instance, Alibaba’s Cloud division reported a 22% year-over-year revenue increase in the fourth quarter of 2025, beating expectations. This was further bolstered by official Chinese retail sales data for December 2025 showing a 5.8% increase, suggesting a resilient consumer base heading into the new year.
Looking at the options market itself, we’ve seen a notable shift in sentiment over the past week. The put-call ratio for Alibaba has fallen from 0.95 to 0.72, indicating that traders are buying significantly more calls than puts. Additionally, implied volatility is currently at a moderate rank of 45, suggesting options are not overly expensive ahead of this potential Wave 3 surge.
To manage risk while staying positioned for gains, traders could consider using bull call spreads. One could buy the March $180 call and simultaneously sell the March $195 call, which lowers the initial cost and breakeven point. This trade profits from a rise toward the target zone but caps the maximum gain if the stock surges beyond $195.
The key level to watch is the January 20th low around $168. A decisive break below this price would invalidate the immediate bullish outlook and signal that the correction is not yet over. Traders holding bullish positions should use this level as a clear point to reassess or exit their trades to protect capital.
