Alibaba Group Holding Limited (NYSE:BABA) investors optimistic about the Trump administration reaching a deal with China

Alibaba Group Holding Limited (NYSE:BABA) investors optimistic about the Trump administration reaching a deal with China

Alibaba Group Holding Limited (NYSE:BABA) investors optimistic about the Trump administration reaching a deal with China

When the U.S. backed off from imposing tariffs on Mexico, investors became more optimistic about the Trump administration reaching a deal with China. So it’s not surprising that China-based stocks have rallied nicely in the last week, enough to suggest that investors should look at them again.

On May 28, Reuters reported that Alibaba would raise $20 billion through a Hong Kong listing of Alibaba stock. The additional liquidity gives the e-commerce giant some insurance against risks associated with the U.S.-China trade war. If BABA delists Alibaba stock from the U.S. market, it will still have plenty of cash on its balance sheet, and BABA stock will still be publicly traded, albeit in Hong Kong.

Listing  Alibaba stock on the Asian exchange also prevents Americans’ animus towards China from holding down the valuation of all BABA stock. In New York, Alibaba stock trades at a forward price-earnings ratio of 18.6, even though analysts,  on average, expect its earnings per share to jump  36% this year.

Alibaba does not need the $20 billion from listing Alibaba stock in Hong Kong. At the end of last quarter, (BABA’s fiscal fourth quarter) the company had cash, cash equivalents, and short-term investments of $28.8 billion. To increase shareholder value, the company bought back 10.9 million shares of Alibaba stock for $1.6 billion. Looking ahead, Alibaba expects its top line in FY 2020 to come in at $28.9 billion (RMB 500 billion). Expect the company to use some of its cash to buy back more shares of Alibaba stock this year.

Overall, the bias in prices is: Downwards.

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

By the way, prices are vulnerable to a correction towards 165.44.

The projected upper bound is: 170.20.

The projected lower bound is: 149.61.

The projected closing price is: 159.90.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

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 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 68.6143. 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 46.57. 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 7 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 102.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 8 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 5 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 0.290 at 160.330. Volume was 37% above average (neutral) and Bollinger Bands were 14% wider than normal.

Open High Low Close Volume___
160.490 161.320 159.810 160.330 4,578,308

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 155.36 173.65 163.00
Volatility: 33 38 44
Volume: 4,149,040 3,932,374 3,984,479

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.

Summary

ALIBABA GRP ADR is currently 1.6% below 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 moderate flows of volume out of BABA.N (mildly bearish). Our trend forecasting oscillators are currently bearish on BABA.N and have had this outlook for the last 24 periods.

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