Alibaba Group Holding Limited (NYSE:BABA) Why investors are selling Chinese stocks

Alibaba Group Holding Limited (NYSE:BABA) Why investors are selling Chinese stocks

Alibaba Group Holding Limited (NYSE:BABA) Why investors are selling Chinese stocks

The trade war between the U.S. and China has caused many investors to avoid Chinese stocks, but many of the top names — including the BAT stocks — have limited exposure to rising tariffs.

Baidu generates most of its revenue from ad sales in China, Alibaba makes most of its money from Chinese e-commerce platforms, and most of Tencent’s money comes from its Chinese social media platforms (like WeChat) and video game business. Therefore dumping those tech stocks on tariff concerns alone is irrational.

Selling these stocks on higher U.S. interest rates also doesn’t make much sense. Some investors might want to lock in their gains and shift their money to less volatile stocks or bonds, but investors would also miss out on some big long-term gains as China’s internet market continues to grow.

Panic selling creates buying opportunities

Warren Buffett famously told investors to be “greedy when others are fearful,” and the depressed valuations of many Chinese tech stocks indicate that there’s plenty of fear. Here’s a closer look at analysts’ revenue and earnings estimates for the BAT stocks, and how they compare to their forward P/E ratios.

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 167.49.

The projected upper bound is: 157.06.

The projected lower bound is: 136.11.

The projected closing price is: 146.58.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 17 white candles and 33 black candles for a net of 16 black candles.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 6 rising windows in the last 50 candles–this makes the current rising window even more 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 29.1736. This is not an overbought or oversold reading. The last signal was a buy 0 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 37.46. 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 -77. 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 5 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 5.390 at 147.290. Volume was 75% above average (neutral) and Bollinger Bands were 45% wider than normal.

Open High Low Close Volume___
148.630 148.650 144.530 147.290 7,799,673

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 152.09 166.41 183.49
Volatility: 54 42 41
Volume: 5,591,828 5,175,074 4,177,726

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 gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
ALIBABA GRP ADR is currently 19.7% 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 8 periods.

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