Strained U.S.-China relations expose how truly vulnerable Alibaba Group Holding Limited (NYSE:BABA) stock is

Strained U.S.-China relations expose how truly vulnerable Alibaba Group Holding Limited (NYSE:BABA) stock is

Strained U.S.-China relations expose how truly vulnerable Alibaba Group Holding Limited (NYSE:BABA) stock is

It’s amazing the difference a month’s time can make. In early May, headlines shouted that insiders believed a trade deal between the U.S. and China was imminent. Today, leaders from the two nations have ratcheted up their angry rhetoric. This of course places incredible pressure on Chinese flagship company Alibaba (NYSE:BABA) and the underlying BABA stock.

Naturally, investment sentiment perfectly illustrates the ebb and flow within the political realm. The first three trading sessions last month started with relatively strong upside movements. But once angry social-media posts proliferated from the White House, the Alibaba stock price tanked. Since May 1, shares have dropped nearly 21% while the 403-stock iShares MSCI China ETF (NASDAQ:MCHI) is down 12.4%; BABA stock is the exchange-traded fund’s second-biggest holding.

Those looking for a respite in Alibaba stock shouldn’t hold their breath. Throughout the first round of the U.S.-China trade war, Beijing adopted a comparatively measured approach. They were content in letting, to paraphrase Confucius, a fool open his mouth and remove all doubts (about his foolishness).

But now, the second-biggest economy in the world has apparently lost its patience. Just recently, Beijing launched an attack on the Trump administration, calling out American “intimidation and coercion.” Such nasty vitriol does nothing for the longer-term prospects of the BABA stock price.

Yet Alibaba seems to have a workaround. Last year, the Chinese tech giant introduced its strategy to court high-level international brands to its home import market. A synergistic component of this strategy is to sell cloud services to international firms seeking a foothold in China.

This vision had the potential to take Alibaba stock to the next phase of its growth cycle. But with the trade war showing no signs of abating, investors should dismiss this narrative.

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 166.10.

The projected upper bound is: 160.98.

The projected lower bound is: 140.95.

The projected closing price is: 150.97.

Candlesticks

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 26 white candles and 24 black candles for a net of 2 white candles.

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 57.0882. This is not an overbought or oversold reading. 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 31.40. 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 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 -64. This is not a topping or bottoming area. The last signal was a buy 3 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 buy 0 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -0.150 at 151.500. Volume was 3% above average (neutral) and Bollinger Bands were 83% wider than normal.

Open High Low Close Volume___
152.000 152.700 150.590 151.500 3,460,010

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

Moving Averages: 10-period 50-period 200-period
Close: 152.58 175.70 163.41
Volatility: 25 36 44
Volume: 5,321,211 3,741,286 4,055,902

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 7.3% below its 200-period moving average and is in an downward trend. Volatility is high 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 19 periods.

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