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Alibaba Group Holding Limited (NYSE:BABA) among the top stocks to consider with a three-to-five-year investment horizon


Alibaba Group Holding Limited (NYSE:BABA) among the top stocks to consider with a three-to-five-year investment horizon

Even as the global economy weakens, there are opportunities to add stocks in a long-term portfolio. Alibaba Group(NYSE: BABA ) is among the top stocks to consider with a three-to-five-year investment horizon. This coverage on Alibaba stock will discuss the factors that will help the e-commerce giant sustain robust growth in the coming years.

Alibaba stock is almost at the same level it was in August 2018 even after strong quarterly results and attractive valuations. I believe that this sideways movement is a good opportunity to accumulate the stock. A break-out on the upside is inevitable in the foreseeable future.

China’s Consumption Boom and BABA Stock

China’s economic downturn is primarily due to manufacturing and production excesses. China’s consumption sector still remains healthy.

To put things into perspective, China will be the largest retail market in 2019. Further, it is expected that between 2019 and 2024, China’s retail sector will grow at a CAGR of 10.6%.

According to a report from McKinsey & Company , 78% of GDP growth in the first nine months of 2018 was driven by consumption. The report also states that 6% GDP growth in 2019 is likely only if the consumption boom sustains.

Therefore, with consumption critical for growth, the government will support policies that trigger the consumption boom. In addition, I believe that the Chinese Yuan will appreciate in the coming years which will increase the purchasing power of consumers.

Overall, China is moving from a manufacturing boom to a consumption boom. Very similar to the manufacturing boom, this trend is likely to sustain in the coming decade.

Alibaba Group and BABA stock are well-positioned to benefit from the boom with a healthy growth in active users.

BABA Has Strong Growth, Attractive Valuations

Alibaba stock will continue to report robust growth with sustained upside in core commerce and with financial muscles for inorganic growth. My view is underscored by the point that analyst estimates suggest average 5-year earnings growth at 22.1%.

Considering the potential growth trajectory, BABA stock is trading at attractive valuations. The stock currently trades at a forward PE of 20.6 as compared to a forward PE of 28.45 for JD.com.

I therefore expect the stock to trend higher in the coming quarters.

Final Words on BABA Stock

Alibaba is an attractive stock for the long-term considering the growth in China’s retail sector. Besides having a leading market share, Alibaba has the financial flexibility to pursue organic and inorganic growth.

Core commerce will continue to drive revenue and EBITDA. Further, investment in cloud computing is a potential long-term value creator.

Alibaba will also create shareholder value through share repurchase and potential dividends. Robust free cash flows provide the company with the required liquidity.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 188.44.

The projected lower bound is: 169.09.

The projected closing price is: 178.76.


A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.

A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 9 rising windows in the last 50 candles–this makes the current rising window even more bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 91.0360. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 8 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 62.58. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 9 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 164.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 7 period(s) ago.


The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 3.680 at 178.280. Volume was 21% below average (neutral) and Bollinger Bands were 41% wider than normal.

Open     High      Low     Close     Volume___
177.380 178.800 175.610 178.280 3,056,084
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 164.32 168.24 165.74
Volatility: 36 37 40
Volume: 3,445,286 3,756,458 3,744,480

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.


ALIBABA GRP ADR gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
ALIBABA GRP ADR is currently 7.6% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of BABA.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on BABA.N and have had this outlook for the last 12 periods.

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.