Alibaba Group Holding Limited (NYSE:BABA) Has a Case of the ‘Yeah But’s’
Should you buy into the recent rally in Alibaba (NYSE:BABA)? This whole situation for Alibaba stock and its investors reminds me of lyrics from the late Tom Petty, “The waiting is the hardest part.” After all, alongside all of the recent drama surrounding the coronavirus from China, the company is scheduled to report third-quarter 2020 earnings on Feb. 13.
As 2019 drew to a close, 2020 looked to be a great year for Chinese stocks. The phase one trade deal with the United States brought a much needed cooling of rhetoric, if not actual tariffs. Then, right before the new year, we started to hear about the coronavirus.
As the coronavirus dominated the news cycle in January, Alibaba was not immune to the selloff in Chinese stocks. However, the stock has rallied recently. And analysts seem confident that the company will post solid earnings. Alibaba can only hope they’re right. Because, right now, Alibaba needs a positive earnings report to change the coronavirus narrative.
Alibaba Has a Case of the ‘Yeah But’s’
For Alibaba stock, the current narrative goes something like this. “There’s no reason to believe the coronavirus will affect the stock long term. But what affect will the coronavirus have on the Chinese economy in the short term?”
“One thing is certain, however. It’s too soon to determine how significant the impact of this virus will be on Alibaba stock and the Chinese/global economy. In the very long term, I think everything will turn out well for the company. More importantly, I think everything will turn out well for the world … at least when it comes to the virus.”
Clearly, the company is facing some serious questions ahead of its earnings report on Thursday.
What Does This Mean For BABA Stock?
Alibaba stock dropped to around $205 after the first reports of the virus broke out. Since then, it has rallied and turned positive for the year to date. That leaves investors with a choice. If you believe that the worst of the coronavirus was already been priced into the stock when it hit $205, then this may be the time to jump in. However, if there continues to be conflicting if not outright bad news about the coronavirus, then the stock may find itself range bound until things shake out.
Over the long arc of history, Alibaba is a good stock and will most likely be a great investment. But is this a dip you should buy on? I’m skeptical, but I tend to avoid stocks with a hefty risk premium. And I especially avoid stocks when I have no practical way of calculating that risk premium.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 228.02.
The projected lower bound is: 206.08.
The projected closing price is: 217.05.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 4 falling windows in the last 50 candles–this makes the current falling window even more bearish. The two candles preceding the falling window were black, which makes this pattern even more bearish.
Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 63.9517. This is not an overbought or oversold reading. The last signal was a sell 1 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 51.21. 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 sell 16 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 14. This is not a topping or bottoming area. The last signal was a buy 4 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 1 period(s) ago.
Rex Takasugi – TD Profile
ALIBABA GRP ADR closed down -4.370 at 216.530. Volume was 2% above average (neutral) and Bollinger Bands were 25% wider than normal.
Open High Low Close Volume___
217.280 217.750 214.880 216.530 3,536,195
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 213.65 212.22 182.10
Volatility: 47 33 36
Volume: 3,563,891 3,876,023 3,546,168
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 down today (bearish) 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 18.9% above its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. 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 9 periods.
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