Alibaba Group Holding Limited (NYSE:BABA) set to rally over the next several months

Alibaba Group Holding Limited (NYSE:BABA) set to rally over the next several months

Alibaba Group Holding Limited (NYSE:BABA) set to rally over the next several months

Since early October, the broader markets have been spiraling downward on concerns that more rate hikes and bigger tariffs would create a material drag on global economic growth. But over the past two weeks, those two major concerns have significantly receded, leaving some investors seeking out stocks to buy once more.

Last week, Federal Reserve Chair Jerome Powell sounded a surprisingly dovish tone in a well-watched speech, with the broad implication being that there are only a few rate hikes left in the pipeline. Stocks jumped higher after that speech. Meanwhile, over the weekend, the U.S. and China came to a truce and agreed to a 90-day pause in the current trade war. Stocks jumped in response to that news, too.

Overall, the two major headwinds which have been dragging on markets since October are now significantly receding. That means it’s time to start getting bullish again, especially on the names that have been significantly weighed by the rate hike and trade war headwinds.

China e-commerce giant Alibaba (NYSE:BABA) has dropped into bear market territory quite simply because it is China’s e-commerce giant. Trade war tensions with the U.S. have created economic uncertainty in China. That uncertainty is starting to show up in slower growth and output. Granted, the Chinese economy is still growing at a 6%-plus clip, but growth is showing a disheartening slowing trend which has kept investor enthusiasm checked. Alibaba, as the heartbeat of the Chinese economy, has suffered during this slowdown, too.

Why It Will Bounce Back: Alibaba stock should rebound now that the trade war is on pause because that has been this stock’s single largest headwind. Outside of trade war noise, Alibaba has continued to report really strong numbers. Core commerce revenue growth last quarter was in excess of 50%. Cloud computing growth was 90%. Customer growth was robust, and while margins continued to struggle, that is just a near-term phenomena that is the consequence of growth-related investments. Overall, the growth story supporting Alibaba stock remains robust, so with its biggest headwind now on pause, this stock should rebound from its 20%-plus sell-off.

Overall, the bias in prices is: Downwards.

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

The projected upper bound is: 171.19.

The projected lower bound is: 145.30.

The projected closing price is: 158.24.

Candlesticks

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 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.

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 60.2465. 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 55.52. 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 36 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 88. This is not a topping or bottoming area. The last signal was a sell 0 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 23 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -5.400 at 158.340. Volume was 5% above average (neutral) and Bollinger Bands were 3% narrower than normal.

Open High Low Close Volume___
164.820 164.960 156.460 158.340 5,263,056

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

Moving Averages: 10-period 50-period 200-period
Close: 155.68 150.74 176.62
Volatility: 44 56 43
Volume: 5,642,427 4,868,205 4,274,668

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 10.3% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. 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 13 periods.

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