Alibaba Group Holding Limited (NYSE:BABA) Stock Could Climb Further

Alibaba Group Holding Limited (NYSE:BABA) Stock Could Climb Further

Alibaba Group Holding Limited (NYSE:BABA) Stock Could Climb Further

With Alibaba (NYSE:BABA) stock just off its 52-week high, is now a good time to buy the shares? After treading water in the middle of 2019, Alibaba stock has rallied since November, with investors no longer discounting the company due to the trade war. As a result, the shares’ valuation has risen meaningfully. But the stock can still rise much further.

Everybody knows that BABA is dominant in the  Chinese e-commerce sector. But the company’s new frontiers will drive Alibaba stock higher. Specifically, cloud computing and financial services could propel the “Amazon of China” to new levels. And even if  U.S.-China trade tensions return, Alibaba’s underlying business may not be negatively impacted.

Alibaba Stock Has Multiple, Positive Catalysts

Alibaba’s core e-commerce business is not the only factor that could push BABA’s shares higher. Cloud computing and financial services are key potential catalysts for BABA. But e-commerce is no slouch in the growth department. In the third quarter, Alibaba’s core Chinese e-commerce business grew 40% year-over-year.

But will BABA’s e-commerce unit continue to expand this year? According to the International Monetary Fund, China’s GDP will climb 6% this year. That would mark a deceleration from prior years. But it may be enough to enable the country’s e-commerce sector to continue to expand. And while BABA’s e-commerce unit is growing rapidly, its cloud computing unit, which expanded 64% quarter-over-quarter in Q3, is delivering real growth for the company.

As InvestorPlace contributor Dana Blankenhorn wrote in his column published on Jan. 21, Alibaba’s cloud offering may be more powerful than Amazon’s (NASDAQ:AMZN). Providing more advanced services and applications, Alibaba has a great opportunity to dominate cloud computing, both on its home turf and throughout Southeast Asia.

How about financial services? Alibaba has Ant Financial. While Alibaba owns just 33% of this entity, Ant Financial is growing fast. As InvestorPlace contributor Faisal Humayun discussed in his Jan. 15 column, Ant Financial itself has many growth catalysts.

Ant will soon launch an initial public offering. Once Ant is publicly traded, the market, taking into account the higher value of BABA’s Ant Financial stake, could push Alibaba stock higher.

All these factors indicate that Alibaba could very well rise further in 2020. But how about the U.S.-China trade issue? Actually, that has less of an impact on BABA than some might think.

The Trade Dispute May Not Have Much of an Impact

In 2019, it seemed like the U.S.-China trade war was holding back Alibaba stock. After the countries reached a truce,  the shares advanced. But according to University of Buffalo Professor Veljko Fotak, U.S.-China trade relations may not have much impact on Alibaba.

Fotak told InvestorPlace that “the trade war will not affect Alibaba in a dramatic manner.” Very little of Alibaba’s revenue comes from the U.S. And most of Alibaba’s products come from within China. To further convey his point, Fotak pointed out that Alibaba’s stock didn’t rally after the signing of “phase one” of the trade deal. Instead, the shares dipped 0.4%, or as he said, they had a “non-reaction.”

Technical Indicators

Overall, the bias in prices is: Upwards.

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

The projected upper bound is: 228.45.

The projected lower bound is: 211.08.

The projected closing price is: 219.77.

Candlesticks

A white body occurred (because prices closed higher than they opened).
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 31 white candles and 19 black candles for a net of 12 white 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 3 falling windows in the last 50 candles–this makes the current falling window even more 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 20.2578. This is not an overbought or oversold reading. The last signal was a sell 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 54.02. 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 sell 5 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 -69. This is not a topping or bottoming area. The last signal was a sell 5 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 2 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -3.240 at 219.130. Volume was 4% below average (neutral) and Bollinger Bands were 9% narrower than normal.

Open     High      Low     Close     Volume___
217.800 220.110 216.770 219.130 3,315,591
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 224.28 205.99 180.59
Volatility: 31 27 35
Volume: 2,743,868 3,804,839 3,490,198

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 21.3% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. 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 58 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.

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