Alibaba Group Holding Limited (NYSE:BABA) stock jumps 6.9% in Hong Kong trading debut

Alibaba Group Holding Limited (NYSE:BABA) stock jumps 6.9% in Hong Kong trading debut

Alibaba Group Holding Limited (NYSE:BABA) stock jumps 6.9% in Hong Kong trading debut

Alibaba’s Hong Kong shares made a solid debut on Tuesday, trading 6.9 per cent higher than their issue price and at a small premium to pricing in New York after marking the world’s largest stock sale this year.

The Chinese e-commerce giant has raised at least $11.3 billion from the secondary listing, which has been seen as a vote of confidence in Hong Kong amid six months of sometimes violent anti-government protests.

That amount could climb to as much as $12.9 billion if Alibaba chooses to exercise an over-allotment option within 30 days of the start of trade. By late morning, the shares were exchanging hands at 188.10 Hong Kong dollars. That compares with its issue price of HK$176 and a closing price for Alibaba’s ADS of $190.45 which would be equivalent to HK$186.3 a share as each ADR is worth eight Hong Kong shares.

The Hong Kong and New York stocks are fungible, which means investors can buy and sell the same shares on either exchange and that pricing on the exchanges are unlikely to diverge too far from each other. UOB Kay Hian sales director Steven Leung said the premium to New York reflected the willingness of investors in the city and Asia to take on the stock of a company they know well but added that the positive momentum could be tough to maintain.

“The ADS is already considered quite high and now the Hong Kong price is showing a premium, so the near term upside in Hong Kong could be limited,” he said.

Stock sale

Alibaba’s Hong Kong listing surpassed other large stock sales this year, ranking ahead of Uber Technologies $8.1 billion IPO and $5.7 billion IPO for Anheuser-Busch InBev’s Asian brewing business in Hong Kong.

At Tuesday’s listing ceremony, chief executive Daniel Zhang noted the Hong Kong debut had been a long time coming. Alibaba had hoped to initially list in Hong Kong, but eventually chose New York for its record-breaking $25 billion initial public offering in 2014 after its unusual governance structure failed to win acceptance from Hong Kong regulators. The loss of the listing triggered years of argument and consultations that resulted in rule changes last year. “Thank you Hong Kong and thank you HKEX. Your reform and innovation of the capital markets in the past few years has made it possible for us to realise what we missed five years ago,” Zhang said at the listing ceremony.

Alibaba is the fifth most-traded company in New York this year, averaging $2.6 billion a day, according to Refinitiv.

In its prospectus, Alibaba said it would use the funds raised to increase its investment in online delivery and local services platform Ele.me and in online travel group Fliggy.

Alibaba also plans to spend more on developing Youku, one of the leading online video platforms in China. Small retail investors were enthusiastic buyers of the deal, subscribing for 40 times the shares they were originally allotted and eventually taking 10 per cent of the deal.

Technical Indicators

Overall, the bias in prices is: Upwards.

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

By the way, prices are vulnerable to a correction towards 177.48.

The projected upper bound is: 204.96.

The projected lower bound is: 185.06.

The projected closing price is: 195.01.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
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 24 white candles and 25 black candles for a net of 1 black 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 97.6894. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 9 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 70.13. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 79 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 244.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 9 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 0 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 4.250 at 194.700. Volume was 703% above average (trending) and Bollinger Bands were 19% narrower than normal.

Open     High      Low     Close     Volume___
190.450 194.990 189.040 194.700 25,937,332
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 185.98 177.01 174.33
Volatility: 28 36 36
Volume: 5,339,774 3,550,891 3,374,090

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 11.7% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect very strong flows of volume into BABA.N (bullish). Our trend forecasting oscillators are currently bullish on BABA.N and have had this outlook for the last 20 periods. Our momentum oscillator is currently indicating that BABA.N is currently in an overbought condition.

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