Alibaba Group Holding Limited (NYSE:BABA) stock factors in ongoing concerns about Chinese stocks
Alibaba (NYSE:BABA) stock continues to diverge from the direction of Alibaba Group. Although the company continues on a path of massive growth, traders have seemed unwilling to buy Alibaba stock.
Investors may have good reasons for concerns about Chinese equities. Still, with the profit growth not reflected in the price of BABA stock, investors may have excellent reasons to buy despite potential worries.
Internals Versus Externals
The “China discount” means that Chinese stocks will trade at a lower price due to their ADR status and the political concerns related to China. I do not see this as much of a worry internally. For now, Alibaba stock has begun to write its history without founder Jack Ma.
As I mentioned in a previous article, Daniel Zhang has taken full control of Alibaba now that Ma has stepped down as chairman. This seems to have caused few issues for investors. Jack Ma telegraphed his intention to step away and did so slowly. Amid the transition, Alibaba continues to produce stellar numbers.
Despite internal stability, the China discount has affected Alibaba. BABA stopped moving higher soon after the beginning of the trade war. As a result, it trades at a price it first reached over two years ago.
Concerns and Benefits
To be sure, traders have plenty of reasons to factor in a China discount. Investors have seen the extent of the turmoil within Hong Kong. As many may recall, Alibaba canceled plans for a Hong Kong IPO following the protests.
However, other factors predate the Hong Kong demonstrations. The fact that U.S. investors cannot buy Chinese stocks directly has likely hampered the growth of these equities. Alibaba stock, or rather the equity of the Cayman Islands-based holding company which represents Alibaba, has traded on the New York Stock Exchange for more than five years. Yet, it has never seen the valuations of its nearest U.S. equivalent, Amazon (NASDAQ:AMZN).
The current price of Alibaba stock more than factors in the political concerns related to China. The holding company status of BABA stock, as well as trade tensions, give U.S. investors plenty of reasons to factor in a China discount.
However, Alibaba may have become too cheap to pass up. Despite revenue and profit growth rates exceeding 30%, BABA trades below S&P 500 averages. Concerns about China may call for a smaller position. Still, with the massive growth of past quarters likely to continue, U.S. investors should at least keep BABA on their watch lists.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 188.14.
The projected lower bound is: 166.88.
The projected closing price is: 177.51.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 4 black candles for a net of 1 white candles. During the past 50 bars, there have been 24 white candles and 25 black candles for a net of 1 black candles.
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 86.4117. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 10 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 57.18. 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 50 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 162.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 5 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 2 period(s) ago.
Rex Takasugi – TD Profile
ALIBABA GRP ADR closed up 1.830 at 177.120. Volume was 13% below average (neutral) and Bollinger Bands were 1% narrower than normal.
Open High Low Close Volume___
175.720 177.340 174.120 177.120 2,730,489
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 169.78 171.44 170.80
Volatility: 41 40 38
Volume: 2,212,442 2,616,371 3,289,517
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 is currently 3.7% above its 200-period moving average and is in an downward 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 bearish on BABA.N and have had this outlook for the last 12 periods.