Alibaba Group Holding Limited (NYSE:BABA) pulls Houston Rockets merchandise as NBA goes into damage control mode in China

Alibaba Group Holding Limited (NYSE:BABA) pulls Houston Rockets merchandise as NBA goes into damage control mode in China

Alibaba Group Holding Limited (NYSE:BABA) pulls Houston Rockets merchandise as NBA goes into damage control mode in China

The relationship between the U.S. and China has played a large role in the stock market this year. As the trade war between the two countries intensifies and then appears to cool, many stocks have been been impacted.

Sometimes the tension between the two countries veers into unpredictable territory with unexpected ripple effects. That’s the case with the current situation, ignited by a tweet from the general manager of the NBA’s Houston Rockets in support of anti-government protesters in Hong Kong. Among the ripple effects of this action was for Chinese e-commerce giant Alibaba (NYSE:BABA) — whose co-founder happens to own the NBA’s Brooklynn Nets — to yank Houston Rockets merchandise from its online stores. As the situation simmers, Alibaba stock dipped 1.19%.

As many of these situations are, the NBA’s Hong Kong problem is complicated.

To set a backdrop, the NBA has been looking to China as a major source of revenue. With a market worth billions of dollars, the NBA reportedly has 200 employees in the country to coordinate streaming games, pre-season live games, recruitment and merchandise sales. As part of that relationship, former Houston Rockets player (and NBA Hall of Famer) Yao Ming is president of the Chinese Basketball Association. And, Alibaba co-founder Joseph Tsai owns the NBA’s Brooklyn Nets.

The crisis was ignited over the weekend when the Houston Rockets general manager took to Twitter (NASDAQ:TWTR) to say: “Fight for freedom. Stand with Hong Kong” in support of demonstrators in Hong Kong. They have been protesting for months against proposed legislation that would make residents subject to Chinese jurisdiction. The tweet was deleted and an apology quickly posted, but the damage was done. The NBA has issued several formal apologies since (the latest on Tuesday morning), but the tweet has resulted in a big rift between the basketball league and China.

Among the actions taken to date, the Chinese Basketball Association cancelled four NBA matches scheduled to take place in China in October, and announced it is suspending its relationship with the Houston Rockets. Both Alibaba and China’s JD.com (NASDAQ:JD) have delisted Houston Rockets merchandise from their online stores. China’s state broadcaster and Tencent announced they will stop showing Houston Rockets games.

Technical Indicators

Overall, the bias in prices is: Downwards.

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

The projected upper bound is: 172.88.

The projected lower bound is: 150.38.

The projected closing price is: 161.63.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 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.

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 50.7047. This is not an overbought or oversold reading. The last signal was a buy 4 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 37.75. 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 44 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 -111.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 3 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 10 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -6.390 at 161.930. Volume was 25% below average (neutral) and Bollinger Bands were 1% wider than normal.

Open     High      Low     Close     Volume___
164.170 165.130 161.680 161.930 2,455,519
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 168.59 170.58 169.74
Volatility: 46 42 38
Volume: 2,713,404 2,821,763 3,327,752

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 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 4.6% 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 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 6 periods.

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