Can Alibaba Group Holding Limited (NYSE:BABA) Stock Still Rally?
Alibaba Holding Group (NYSE:BABA) hasn’t had the best few weeks. After BABA stock hit a high just over $210 in mid-June, shares quickly cascaded lower, falling to almost $180 by July.
I think there are several factors at play here. The first, several economic data points out of China came in below expectations. It’s got investors worried about the country’s growth and what it’s consumers purchasing power will look like.
Second, the Chinese stock market hasn’t been doing all that well. In fact, very quietly, the iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA:FXI) briefly dipped into bear market territory last week, as it was down more than 20% from its January highs. Third, Chinese momentum names lost all of their mojo. Stocks like iQiyi (NASDAQ:IQ), Bilibili (NASDAQ:BILI), Huya (NYSE:HUYA) and Sogou (NYSE:SOGO) have all been under serious pressure after exploding higher in late May and early June. Conveniently, this group has been consolidating and so too has BABA stock.
Fourth, the ongoing trade war discussions between the U.S. and China are persisting. While that may not have a direct impact on Alibaba, the rhetoric doesn’t help investor confidence and their outlook on the global economy. Fifth and finally, China’s currency has been under pressure, which has also negatively impacted BABA stock.
So Can BABA Stock Still Rally?
Clearly there are a few possible catalysts in play for why BABA stock has been underperforming. Still, investors should feel comfortable overlooking some of these catalysts.
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To address some of the latter points, Chinese momentum names don’t drive Alibaba. While it might hurt short-term sentiment — just like the trade-war rhetoric — it doesn’t have an impact on Alibaba’s bottom line. Currency fluctuations do though, and several analysts have been ratcheting down their expectations. However, most of them still maintain a buy rating and big price targets.
One of those analysts is Colin Sebastian of Baird. He trimmed his earnings outlook but maintains a buy rating and $220 price target, implying 14% upside. Another analyst is Mark Sanderson of MKM Partners. He explained that currency devaluation has historically hurt BABA stock, but each time it was an attractive buying opportunity. He maintains a $280 price target, implying 45% upside from current levels.
In fact, there’s been a number of other big calls this month. Keybanc analysts slapped a $235 price target on BABA stock while SunTrust hit it with a less inspiring $215 price target. But Susquehanna analysts take the cake with their $305 price target. Their outlook implies more $110 per share in upside or 58% upside.
That’s no small move for a stock that sports a $475 billion market cap. But given Alibaba’s massive growth rates, it’s actually not as crazy as it seems.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 202.50.
The projected lower bound is: 183.21.
The projected closing price is: 192.86.
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 26 white candles and 24 black candles for a net of 2 white candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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 87.3357. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 5 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 46.65. 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 22 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 13. This is not a topping or bottoming area. The last signal was a buy 4 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 18 period(s) ago.
Rex Takasugi – TD Profile
ALIBABA GRP ADR closed down -0.200 at 192.550. Volume was 33% below average (neutral) and Bollinger Bands were 46% wider than normal.
Open High Low Close Volume___
193.000 195.110 191.480 192.550 2,518,213
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 188.59 196.66 185.68
Volatility: 32 31 38
Volume: 3,436,540 3,961,448 3,918,482
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 3.7% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume out of BABA.N (mildly bearish). Our trend forecasting oscillators are currently bearish on BABA.N and have had this outlook for the last 11 periods.
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