Alibaba Group Holding Limited (NYSE:BABA) is climbing back to its 52-week high, but is it time to buy?
With U.S.-China trade talks entering a dètente, Alibaba (NASDAQ:BABA) shares have rebounded from about $150 in early June to $173 today.
Although the trade talks are far from resolved, with Alibaba focused more on domestic Chinese retail than global e-commerce, the company stands to gain from China’s growing middle class.
But outside of these macro factors, is Alibaba a buy at today’s stock price?
The stock trades at a discount to Amazon (NASDAQ:AMZN), but given its complex ownership structure and related Chinese jurisdictional risks, this discount may be justified. Add in a planned liquidation from a large shareholder, and BABA stock could see downward pressure in the second half of 2019.
Handicapping the U.S.-China Trade War
Alibaba stock could lose big if the U.S.-China trade war comes to blows. At present, the dètente defers — but does not eliminate — this risk.
The company is confident it can withstand the trade war headwinds. For one thing, Alibaba is less dependent on international trade and more tied to the Chinese consumer market. As Sanford C. Bernstein analyst David Dai said, Alibaba has a “hold on Chinese consumers and merchants [that] is almost unassailable.”
Even if the U.S.-China trade war intensifies, Alibaba should weather the storm and continue their growth strategy. In addition, a win-win resolution to the trade war could help bolster Alibaba’s leading catalyst: the growth of China’s middle class.
China’s Growing Middle Class Key to Alibaba’s Future Success
Investors looking at Alibaba stock today should consider the macro story of China’s emerging middle class. Alibaba is best known as a marketplace of Chinese-manufactured goods to the world. But 66% of the company’s FY19 revenue comes from Chinese retail e-commerce.
As Alibaba Vice Chairman Joseph Tsai commented during a conference call in May, Alibaba benefits from increased imports into China. A growing middle class (currently around 400 million) is driving Chinese demand for imported consumer products. As the “Amazon of China,” Alibaba can profit from this demand, continuing their impressive growth into the near future.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 178.47.
The projected lower bound is: 157.66.
The projected closing price is: 168.06.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black 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 8 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 41.0605. This is not an overbought or oversold reading. The last signal was a sell 17 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 51.47. 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 23 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 -21. This is not a topping or bottoming area. The last signal was a sell 1 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 21 period(s) ago.
Rex Takasugi – TD Profile
ALIBABA GRP ADR closed down -4.850 at 168.450. Volume was 7% below average (neutral) and Bollinger Bands were 7% narrower than normal.
Open High Low Close Volume___
170.030 170.120 168.360 168.450 3,335,511
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 171.02 168.18 163.15
Volatility: 31 39 43
Volume: 3,691,807 4,356,875 3,908,306
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 3.2% above its 200-period moving average and is in an upward trend. Volatility is Our volume indicators reflect volume flowing into and out of BABA.N at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on BABA.N and have had this outlook for the last 12 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.