Alibaba (BABA) – Request report stock has been struggling lately. Shares of the ecommerce giant are up nearly 1% on Monday, but that comes after a painful close from the week before.
In a trading week shortened with holidays, Alibaba did not deliver gifts to its investors. Instead, it handed out coal, dropping 13% on Friday and 15% for the week.
At Friday’s low, shares fell nearly 18% as investors sold hand over fist.
At lows near USD 211, Alibaba shares fell nearly 34% from the October 27 highs. What happened in less than two months?
First, the Ant IPO was pulled just days before its public debut. Since Alibaba has a third share of the company, this was a negative catalyst and it is clear from the charts.
Although Ant’s IPO has been delayed due to regulatory issues, new regulatory issues targeting Alibaba were the latest catalyst for the sell-off.
As we approach 2021, this seems more of a buy opportunity than a sell opportunity. Management must agree as the company is now expanding the scope of its share buyback plan.
Trading Alibaba Shares
Monthly chart of Alibaba stock.
Chart courtesy of TrendSpider.com
Because of the negative catalysts above, look at the way Alibaba’s stock has been unwinding over the past two months. After standing up for seven consecutive months, the bulls had a painful abdominal thrust.
However, not all hope is lost.
First, the stock finds support at the 21-month moving average. It is also finding support at its 2018 high of USD 211.70. The shares hit a low near this level on Friday, with a low of $ 211.23.
While the 2018 high may seem somewhat irrelevant, take a look at how remarkable this area was in late 2019 and the first half of 2020. This area was an issue, highlighted by all fuses above this mark, but no solid close above $ 211.70 .
This took six months – until this summer.
Being about 30% below the highs for a high-end growth company seems like a safe place to dip your toe in the water. Conservative traders can measure their risk against the current low and look for a recovery.
At a daily close below $ 211, it could bring the monthly volume-weighted average price close to $ 197. It could also bring into play the 200-week moving average, which is currently close to $ 187 (not shown in the chart above).
Those would be negative concerns.
On the upside, look for a rebound to the 50-week moving average near $ 240, followed by the 10-month moving average which is currently near $ 246. In the vicinity of the latter, the 200-day moving average also comes into play.
While it may take some time for a sustainable recovery to take place, this seems like a reasonable dip to buy for patient bulls.