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Alibaba could roar nearly 20% higher if it breaks this one level, chart suggests

Trading Nation: Chinese stocks pop after Alibaba earnings

Chinese stocks are breaking out as trade progress between the U.S. and China hits the headlines again.

The FXI China large-cap ETF soared more than 1% on Monday, adding to 2% gains seen at the end of last week.

"The charts have definitely seen some notable recent strength, but I don't know if they're just out of the woods yet," J.C. O'Hara, chief market technician at MKM Partners, said on CNBC's "Trading Nation" on Friday.

O'Hara said one of the top Chinese stocks could be ready to break out, but it needs to clear one critical level.

"Let's take a look at Alibaba. If you go back over the last 12 to 18 months you do see a series of higher lows in place, and that's definitely positive, but there's still a series of lower highs," he said. But, "until we see Alibaba break above $185 — that will, in essence, create a new high — I'm a little cautious here."

If Alibaba can move above that level, O'Hara said, it's a straight shot back to highs not seen in more than a year.

"We get positive above that $185 level because above $185 we think there's a clear shot to the 2018 highs at $210. So that's why I turned incrementally more positive, so first [we have to] watch $185 and then we'll see where we go from there," he said.

Alibaba needs to rally more than 3% to reach $185. It would need to move 18% higher to reach $210.

John Petrides, portfolio manager at Tocqueville Asset Management, says the group as a whole is beginning to look more promising.

"We think the large-cap tech social media giants in China are quite attractive particularly over the long term," Petrides said during the same segment. "They generate a ton of cash flow, the demographics are in their favor and ... in September the risk was that the U.S. may delist Chinese securities. That does seem to be behind us, which I think provides a valuation opportunity."

The FXI ETF trades at 8 times forward earnings, significantly cheaper than the 17 times multiple on the S&P 500.