Alibaba Group Holding Limited (NYSE:BABA) valuation appears to be compelling
Alibaba’s (NYSE:BABA) stock may be due to increase by 7% or more in the coming weeks based on some recent options bets. Additionally, the technical chart is in agreement with the options betting, also indicating the stock may rise from its current price of approximately $171 on July 15. The stock’s one-year forward price to earnings multiple is also near a 3-year low, making its current valuation compelling.
The last time I wrote on Alibaba was on June 19. At the time, I noted the stock could rise to as high as $179.50 from its then price of $165.65. The stock increased by 7.5% to a high of $177.95 on July 1, less than 1.75% from my target. You can now track my success and failure rate on Alibaba and all of my Seeking Alpha articles on this Google Spreadsheet I created. I also have a similar spreadsheet which is exclusive to subscribers of my Seeking Alpha Marketplace service.
Betting On A Jump By September
The options for expiration on September 20 have seen their open interest surge at the $175 strike price on July 15. The interest rose by almost 18,000 contracts, to a total open interest of nearly 35,000 contracts. For a buyer of the calls to earn a profit, the stock would need to rise above $182.60 if holding the options until the expiration date. There is a considerable wager at that strike price with the total open interest having a dollar value of about $26.2 million, a massive bet the stock increases.
(Alibaba $175 September Calls – Trade Alert)
Chart Points To Higher Prices
Additionally, the chart is bullish and is suggesting the stock increases. The stock recently tested a support level at an uptrend around $166.60 at the beginning of July, a bullish indication. Should the stock continue to rise, it is likely to move higher towards its next level of technical resistance at $182.60. That was a region that offered a great deal of support and resistance during March and April.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
The projected upper bound is: 184.07.
The projected lower bound is: 163.47.
The projected closing price is: 173.77.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.
A doji star occurred (where a doji gaps above or below the previous candle). This often signals a reversal with confirmation occurring on the next bar.
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 85.0665. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 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 60.17. 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 29 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 80. This is not a topping or bottoming area. The last signal was a sell 7 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 sell 4 period(s) ago.
Rex Takasugi – TD Profile
ALIBABA GRP ADR closed up 0.690 at 174.190. Volume was 7% below average (neutral) and Bollinger Bands were 40% narrower than normal.
Open High Low Close Volume___
174.200 175.510 173.470 174.190 3,356,514
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 171.09 165.87 163.32
Volatility: 27 39 43
Volume: 2,907,450 4,404,745 3,888,989
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 6.7% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. 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 18 periods.