This Connection Between Alibaba and TikTok Means Big Bucks for Alibaba Group Holding Limited (NYSE:BABA) Stock
The social media video app TikTok is taking the U.S. by storm. Douyin, the Chinese version of the app, could be even bigger. In fact, it may end up a cash cow for Alibaba Group (NYSE: BABA) stock.
What Is Douyin?
TikTok was the single most downloaded app on the iOS platform in the U.S. in August. The short video clip platform’s app was downloaded 12.1 million times last month, more than Alphabet’s (NASDAQ:GOOGL,NASDAQ:GOOG) YouTube or Facebook’s (NASDAQ:FB) Instagram and WhatsApp. On the Android platform, TikTok generated another 36.6 million U.S. downloads, topped only by WhatsApp at 47.2 million.
TikTok may be the latest smash social media hit in the U.S., but it’s not new to China. In fact, TikTok parent company ByteDance is based in China and launched the original version of TikTok in China back in 2016. The app is called Douyin, and it has 320 million daily active users as of July, according to KeyBanc. That’s user count is roughly in-line with the entire population of the U.S. (327 million).
Douyin and BABA Stock
Last year, Douyin announced it was making a push to monetize its highly successful platform. One way of doing so would be by integrating external shopping links to its platform.
By adding tiny shopping cart logos to the Douyin user interface, users can connect directly to products listed on Alibaba’s Taobao and Tmall e-commerce platforms.
“[Douyin] can be strong weapon for e-commerce, especially for Alibaba Group and Tencent, which want to reach to younger consumers and those living in smaller cities,” Lu Zhenwang, CEO of Wanqing Consultancy, told the South China Morning Post last year.
U.S. investors have used BABA stock as a means of short-selling China throughout the trade war. However, despite the trade war headwinds, Alibaba continues to report staggering growth numbers. Back in June, I suggested investors buy BABA stock on the trade war dip. Since that time, Alibaba reported June quarter revenue growth of 42%, and the stock is up roughly 20%.
I also predicted that Alibaba’s massive trove of short sellers would soon be facing a tough decision. If and when a trade deal is reached, BABA stock could skyrocket. In the month of August, BABA stock short sellers covered more than $1.2 billion of their short positions. In fact, BABA’s outstanding short position has dropped from more than $20 billion to just $3.3 billion since March.
China is scary these days for U.S. investors. But ultimately, the U.S. and China will reach a trade deal. The two nations each have too much to gain from a deal for the dispute to go on forever. Regardless, BABA stock keeps kicking out growth numbers that put all its U.S. tech counterparts to shame. Alibaba’s partnership with Douyin is just one of a long list of reasons BABA stock is the best play on the largest emerging market economy in the world.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 170.86.
The projected upper bound is: 187.10.
The projected lower bound is: 167.18.
The projected closing price is: 177.14.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.
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 51.2348. This is not an overbought or oversold reading. The last signal was a sell 9 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 52.83. 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 33 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 16. This is not a topping or bottoming area. The last signal was a sell 0 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 buy 15 period(s) ago.
Rex Takasugi – TD Profile
ALIBABA GRP ADR closed down -5.530 at 176.980. Volume was 37% below average (neutral) and Bollinger Bands were 32% narrower than normal.
Open High Low Close Volume___
181.250 181.260 176.920 176.980 2,272,532
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 178.45 172.08 168.56
Volatility: 26 38 37
Volume: 2,821,617 2,984,224 3,410,347
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 5.0% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume into BABA.N (mildly bullish). Our trend forecasting oscillators are currently bullish on BABA.N and have had this outlook for the last 22 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.
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