Questions Still Linger about Alibaba Group Holding Limited (NYSE:BABA)

Questions Still Linger about Alibaba Group Holding Limited (NYSE:BABA)

Questions Still Linger about Alibaba Group Holding Limited (NYSE:BABA)

For over a year-and-a-half, one of the biggest concerns for the markets and the global economy was (and technically still is) the U.S.-China trade war. One only needs to look at the price chart of Alibaba Group (NYSE:BABA) shares for confirmation. Since the beginning of October, Alibaba stock has gained nearly 29%.

Questions Still Linger about Alibaba Stock

If the trade negotiations move beyond phase one toward more substantive deals, obviously, this puts BABA stock in an enviable position. And should negotiations continue to progress positively, most Chinese investments will likely move higher.

Furthermore, our own political environment suggests that the bull case for Alibaba stock remains strong. Primarily, we’re entering a critical election year. At the latest count, President Donald Trump’s approval rating has increased to 50%. This indicates that he’s winning back support from swing voters and is positioned slightly advantageously relative to Democratic frontrunners.

As the last election cycle proved, give Trump even a small chance of victory and he’ll deliver. But what absolutely won’t get Trump reelected is if the economy tanks. Or, if he implements policies that hurt American workers, the voters will not be kind to him.

Therefore, you can see how the red carpet is rolling out for Alibaba stock. Nevertheless, investors should exercise vigilance.

Fuzzy Forecast for BABA Stock

Because Alibaba stock is tied to Chinese consumer confidence, I’m not gung-ho on the opportunity. If things go awry during the trade negotiations, shares could once again find themselves on a downward trek.

As I mentioned above, Trump will do anything to keep the economy moving, at least in 2020. At the same time, he can’t afford to look weak against China. Regarding the Asian country’s record on human rights violations, both Republicans and Democrats agree: China must be held accountable.

In other words, just caving to China to get a trade deal signed is not an answer. If Trump goes that route, he’ll be looking for another job come January 2021.

Thus, the bottom line is that BABA stock is a tricky animal. Considering that shares have jumped so much, investors are probably best served waiting for a discount. Despite a potential phase one deal, there are many questions that yet to be answered.

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 198.37.

The projected upper bound is: 228.40.

The projected lower bound is: 212.99.

The projected closing price is: 220.70.

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 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.

A morning star occurred (this is a three-candle pattern). This is a bullish pattern that often signifies a major bottom.

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 4 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 50.7910. This is not an overbought or oversold reading. The last signal was a sell 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 74.37. 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 sell 2 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 136.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 2 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 1 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed up 7.670 at 219.770. Volume was 23% below average (neutral) and Bollinger Bands were 22% wider than normal.

Open     High      Low     Close     Volume___
216.880 219.980 216.725 219.770 2,537,948
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 213.81 193.60 177.66
Volatility: 24 25 35
Volume: 3,435,819 4,009,931 3,491,570

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 23.7% 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 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 44 periods. Our momentum oscillator is currently indicating that BABA.N is currently in an overbought condition. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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.