Alibaba shares are at a critical level. Here’s what it means

One of the best-performing tech stocks this year is testing a critical level, and it could be a make or break moment for the stock's incredible run, according to one technician.

Alibaba share prices have more than doubled this year, but Matt Maley of Miller Tabak warns the stock looks vulnerable heading into earnings on Thursday.

"The stock has had a great run. It's made a series of higher highs and higher lows, which is always very good. It has stayed above its 50-day moving average all year long. However in the last few weeks, it has kind of leveled off," Maley said Friday on CNBC's "Power Lunch." He noted that the stock traded below its 50-day moving average on Thursday morning for the first time since January.

"Right now after such a big run, I'm kind of middle of the road, and the next couple of weeks are going to be very key, whichever way it breaks," he said. "It will either rally further or it rolls back over. It's going to be very key over the next few weeks."

Stacey Gilbert noted there might be better opportunities than being long Alibaba outright.

"The market seems to be divided here. They do see a lot of volatility heading into [earnings]," said the head of derivatives strategy at Susquehanna. Gilbert noted that the implied move on earnings on Thursday is 5 to 6 percent, nearly double the last few quarters. "So there is extra risk being priced into the quarter here, … and options aren't cheap."

She offered Altaba, the part of Yahoo that didn't go with its internet business after Verizon's takeover in June, as an alternative.

"We think that [Altaba] is an interesting alternative, given its 15 percent stake in Alibaba and given that 71 percent of its value is coming from Alibaba," she said Friday on "Power Lunch." "[It is also] trading at a discount on a relative value basis, so that's an area we think is a more interesting alternative for those that aren't in BABA." The stock has surged 77 percent this year so far.

Analysts polled by FactSet are expecting Alibaba to report earnings of $1.04 per share on $7.8 billion in revenue for the third quarter.


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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