Tougher competition and a potential antitrust crackdown loom over Alibaba Group Holding Limited (NYSE:BABA) near term

Tougher competition and a potential antitrust crackdown loom over Alibaba Group Holding Limited (NYSE:BABA) near term

Tougher competition and a potential antitrust crackdown loom over Alibaba Group Holding Limited (NYSE:BABA) near term

Without a doubt, Alibaba (NYSE:BABA) has many huge opportunities, including the growth of its cloud business, the continued expansion of e-commerce in China, and the company’s overseas growth. All of these positive catalysts could easily propel Alibaba stock much higher.

But the Street seems to be overlooking the fact that the company is also facing multiple threats that could easily cause the company’s shares to remain range-bound or even meaningfully decline.

The most important of these threats is the combination of increased competition and a potential Chinese government crackdown on BABA’s alleged antitrust behavior.

Potential Catalysts of Alibaba Stock

Some of Alibaba’s potential catalysts are little-known or underappreciated. It’s starting to try to convince American small businesses to sell their products on its websites. If the initiative is successful, BABA could greatly increase its product assortment, resulting in many more sales and meaningfully higher revenue and profits.

And fears about the coronavirus spreading in China could prevent people in from going out to shop; as a result, many of them could turn to e-commerce instead, boosting Alibaba’s results for this quarter. Moreover, the company is stepping up its efforts to market its offerings to medium-size cities in China.

To unlock these opportunities, management can can use the proceeds from the recent Alibaba Hong Kong listing to bankroll major marketing campaigns.

And of course, there are its more well-known growth opportunities, including its cloud business (even though the unit is still unprofitable, it’s expanding rapidly) and its efforts to penetrate Southeast Asia and India, where Alibaba’s had mixed success. The company’s financial services subsidiary, Ant Financial, and its streaming video units also have tremendous potential.

Bottom Line on Alibaba Stock

BABA has tremendous opportunities, but it also has dangerous, looming threats. Moreover, trading at a trailing P/E ratio of 62 and not far from its all-time highs, Alibaba stock certainly isn’t cheap.

I think that investors can and should avoid BABA and instead buy other stocks that are either cheaper or face less intense threats or both.

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 215.61.

The projected lower bound is: 196.07.

The projected closing price is: 205.84.

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 5 white candles and 5 black candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.

A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 4 falling windows in the last 50 candles–this makes the current falling window even more bearish.

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 20.2907. 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 37.60. 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 7 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 -243.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 7 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 4 period(s) ago.

Rex Takasugi – TD Profile

ALIBABA GRP ADR closed down -8.280 at 205.470. Volume was 43% above average (neutral) and Bollinger Bands were 8% wider than normal.

Open     High      Low     Close     Volume___
201.000 208.000 199.500 205.470 5,008,852
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 221.64 206.90 180.82
Volatility: 37 30 36
Volume: 3,104,182 3,812,630 3,505,624

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 down today (bearish) 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 13.6% above 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 0 periods.

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