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Alibaba Group Holding Limited (NYSE:BABA) Stock Is an Easy Buy Here for These Reasons

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Alibaba Group Holding Limited (NYSE:BABA) Stock Is an Easy Buy Here for These Reasons

In January, shares of Chinese e-commerce leader Alibaba (NYSE:BABA) touched an all-time high. Since then, however, Alibaba stock has declined 18%.

That decline might seem somewhat logical. BABA stock started fading as the coronavirus from China spread in its home market. Pandemic fears followed a trade war that still hasn’t been completely resolved, and which pressured economic growth in mainland China.

But investors need to remember three things. First, as I’ve argued repeatedly of late, the impact of the coronavirus will fade. The world economy, backed by technological innovation, will recover and return to impressive growth.

Second, China is starting to get the coronavirus under control. Apple (NASDAQ:AAPL) has reopened all of its stores in the country. Life there is getting back to normal — as it thankfully will elsewhere in the world at some point.

And finally, Alibaba stock was too cheap even at the highs. This is the best online retailer in one of the world’s two most populous countries. Its growth is mind-boggling given its size — and yet, the market values BABA stock almost as if it were just another company.

Overall, investors willing to take a long-term view in this market have a number of quality names to choose from. That said, though, Alibaba stock should be near the top of the list.

Buy the Dip in BABA Stock

The fact that Alibaba stock saw a short-term selloff isn’t necessarily surprising. But in context, a 18% decline isn’t all that steep. Certainly, it could have been much worse — and has been for other Big Tech stocks. AMZN is down 19% from its highs. while GOOG has dropped nearly 25%.

A 4.8% rally in Alibaba stock on Friday suggests that investors are again seeing value. It could even signal the end of the selloff in BABA.

But however the stock trades in the short term, the long-term case here is exceedingly attractive. There aren’t many better companies out there than Alibaba, and the valuation at this level is only an added bonus.

Technical Indicators

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 204.18.

The projected upper bound is: 196.19.

The projected lower bound is: 164.10.

The projected closing price is: 180.15.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

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 38.2854. This is not an overbought or oversold reading. The last signal was a buy 2 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 36.26. 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 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 -91. This is not a topping or bottoming area. The last signal was a buy 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 sell 19 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 0.880 at 180.880. Volume was 3% above average (neutral) and Bollinger Bands were 80% wider than normal.

Open     High      Low     Close     Volume___
179.350 187.250 177.400 180.880 4,230,987
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 191.12 211.36 186.87
Volatility: 83 51 39
Volume: 5,570,117 4,081,377 3,584,794

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 3.2% below 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 37 periods.

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