Alibaba Group Holding Limited (NYSE:BABA) stock will likely go lower before eventually rebounding

Alibaba Group Holding Limited (NYSE:BABA) stock will likely go lower before eventually rebounding

Alibaba Group Holding Limited (NYSE:BABA) stock will likely go lower before eventually rebounding

Alibaba Group (NYSE:BABA) is an incredibly well-run company with a huge total addressable market and a long runway for growth. So why then is Alibaba stock under a seemingly constant barrage of selling pressure? Simply put, the trade wars.

Valuing BABA Stock

Alibaba stock is clearly out of favor when the trade-war rhetoric intensifies because it’s a China-based company. That’s even as its underlying business remains relatively strong.

Like Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and other mega-cap tech plays in the U.S., these names do not usually hold up when volatility increases significantly even though business remains steady.

Alibaba Group has some similar features to these companies. For one, growth. Analysts expect approximately 33% revenue growth this year and around 30% growth in 2020. It’s not easy for a $400-plus billion market cap company to churn out 30% growth. But when they do, the markets usually reward their stocks with a premium.

On the earnings front, estimates call for 21% growth and around 28% growth this year and next year, respectively. With this year’s estimate of $6.75 per share, it leaves Alibaba stock trading at less than 23-times earnings.

That’s really not a bad price to pay for what many believe is a long-term growth story. Alibaba Group is an internet conglomerate in China and while there may be a lot of headwinds currently present, it could create a big opportunity in the future. An even deeper decline makes Alibaba stock an even more attractive long-term candidate.

I want to see if $150 can buoy BABA stock. Should it fail, sub-$140 should draw some interest from investors. However, $130 is a line in the sand.

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 167.57.

The projected upper bound is: 166.28.

The projected lower bound is: 148.68.

The projected closing price is: 157.48.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 19 white candles and 31 black candles for a net of 12 black candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is 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 11.9327. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 6 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 34.23. This is not a topping or bottoming area. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 0 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 -148.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 6 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 4 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 3.760 at 157.430. Volume was 17% above average (neutral) and Bollinger Bands were 28% wider than normal.

Open     High      Low     Close     Volume___
158.470 158.700 156.130 157.430 4,459,560
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 169.67 165.91 164.69
Volatility: 41 34 42
Volume: 3,877,864 4,090,872 3,800,393

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 4.4% 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 3 periods.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.

You must be logged in to post comments :  
CONNECT WITH