Can Alibaba Find a Long-Term Bottom? Charts Whisper Yes
Michele Schneider | Jan 30, 2024 12:47AM ET
Alibaba (NYSE:BABA).com is one of the world’s largest wholesale marketplaces.
To be honest, I had never gone to their website until today, even though we bought shares in BABA 2 weeks ago.
So, in case you are like me and have not checked them out, they sell a lot of consumer items in bulk.
And they also sell pretty much everything. For instance, if you want a 1000w off-grid wind power Free Energy System for your home or business, you can get one and find an online description of the supplier, including their annual revenue.
Plus, if you want them in bulk, you can order 1000 sets at a reduced price.
BABA is controversial a lot and most recently with a lawsuit settlement on monopolistic practices.
However, the impact on their revenues is nominal and in fact, could be a plus as the company’s stock price trades at just 8x net profits.
Anyway, China overall, has had no shortage of bad press.
Yet, before we learned Jack Ma and others bought up to $200 million of BABA stock, the stock looked and still looks appealing to us.
If one is looking to be a contrarian to all the bad press, then BABA is a company with solid fundamentals.
Hence, the charts are in focus.
There are a few technical aspects we like to focus on that stand out in the Daily chart.
- The new 60+ day low followed by a gap higher leaving a potential long-term bottom
- That gap-up also reversed the price below the January 6-month calendar range
- Although it continues to underperform the benchmark, it is nearly on par.
- Real Motion has a bullish divergence in that momentum is above the 50-DMA while price trades just below its 50-DMA.
- Relative to the China ETFs KWEB and FXI, BABA is doing better
Now looking ahead:
- The 6-month calendar range is support and should hold while the recent lows is the optimal risk point
- The 50-DMA needs to clear and confirm as a phase change to recuperation
- The January 6-month calendar range high at 76.69 is another key area to clear
On these types of trades, risk is extremely important. Finding bottoms is a tricky trade, but when right, can have huge payouts.
Finally, BABA reports earnings pre-US market opening on February 7th.
h2 ETF Summary/h2- S&P 500 (SPY) 480 now the pivotal zone
- Russell 2000 (IWM) 195 pivotal, 190 support to hold
- Dow (DIA) 375 support
- Nasdaq (QQQ) 415 support
- Regional banks (KRE) 50 key to hold
- Semiconductors (SMH) 184 support
- Transportation (IYT) 262 now pivotal
- Biotechnology (IBB) 135 pivotal
- Retail (XRT) Flirting with 70, which has to clear and hold to stay very bullish
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