Alibaba Group Holding Limited (NYSE:BABA) negative economic conditions in China are weighing it down

Alibaba Group Holding Limited (NYSE:BABA) negative economic conditions in China are weighing it down

Alibaba Group Holding Limited (NYSE:BABA) negative economic conditions in China are weighing it down

Alibaba’s (NYSE:BABA) revenue growth story has seemed impossibly good these past few years. The slowdown in China’s economy has presented a slight bump in the road for the company. But thankfully for Alibaba investors, its off-quarters are still much better than most companies’ best quarters in terms of revenue growth. 

In fact, last quarter was the retail company’s 10th straight quarter in which it posted more than 50% year-over-year revenue growth, and it comes at a time when China’s economy is growing at its slowest pace since 2009. That’s why many investors see Alibaba’s growth as nearly untouchable.

Consistently impressive 

Alibaba just hit its 20-year anniversary in September, yet its revenue growth is still on fire even in the midst of tough economic conditions. As you can see in the chart below, Alibaba reported 54% revenue growth for the fiscal 2019 second quarter against the prior-year quarter. For comparison’s sake, Amazon (NASDAQ:AMZN) reported more modest 20% growth in the second quarter of 2015, which marked its own 20-year anniversary. 

QuarterQ1 2018Q2 2018Q3 2018Q4 2018Q1 2019Q2 2019
Revenue Growth (YOY)56%61%56%61%61%54%

SOURCE: ALIBABA. YOY=YEAR OVER YEAR.

It’s fun to compare Amazon and Alibaba because they’re both the biggest e-commerce companies in their respective countries. But Alibaba does have a key advantage — its core audience is China’s population of 1.4 billion people, while Amazon’s main audience is the much smaller U.S. population of about 325 million people. In addition, Amazon’s enormous $197 billion e-commerce revenue makes it harder to grow so fast, vs. Alibaba’s $42 billion e-commerce revenue. And it’s important to note that although Alibaba’s e-commerce business is smaller than Amazon’s in terms of revenue, it’s still far more profitable. 

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 155.33.

The projected upper bound is: 149.76.

The projected lower bound is: 123.96.

The projected closing price is: 136.86.

Candlesticks

A black body occurred (because prices closed lower than they opened).
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 22 white candles and 28 black candles for a net of 6 black candles.

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 8.0486. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 5 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 33.33. 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 46 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 -175.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 10 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 sell 7 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -3.680 at 137.140. Volume was 15% above average (neutral) and Bollinger Bands were 11% wider than normal.

Open High Low Close Volume___
140.750 141.300 135.730 137.140 5,685,456

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

Moving Averages: 10-period 50-period 200-period
Close: 148.61 148.32 174.69
Volatility: 22 56 43
Volume: 4,110,818 5,035,138 4,294,986

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 21.5% below its 200-period moving average and is in an downward trend. Volatility is low 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 2 periods.

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