Alibaba has been slammed over the past couple of two months. And now we can expect bulls to start sweeping in and start buying the e-commerce giant.
Alibaba (BABA) stock has been hit hard recently. Shares of the Chinese e-commerce giant are higher by 1% on Monday, but that is after their painful end to last week.
In the short trading week (due to the holidays), Alibaba did not give investors holiday cheer. Instead, it gave them lumps of coal by losing 13% of its price on Friday, ending with a total loss of 15% for the whole week.
At the lowest point on Friday, its shares were 18% lower as investors sold their shares one after another.
At the low of $211, its stock had lost 34% from its highs on Oct. 27. What happened in these two months?
Well, first the Ant IPO was pulled days before its public debut. And since Alibaba holds one-third ownership in the company, this was a huge negative and the data clearly shows it.
While the IPO was delayed because of regulatory problems, new regulatory issues being aimed at Alibaba are the latest triggers for a deeper selloff.
As we get to 2021, this looks like a purchase opportunity rather than a selling moment. Management agrees, as they are now increasing the company’s share repurchase plans.
Alibaba Stock Trading
Chart courtesy of TrendSpider.com
Because of the triggers mentioned above, look at what has happened to Alibaba stock over the past couple of months. After increasing for almost half a year, investors took a sharp gut punch.
But hope is not lost.
The stock is getting support at its 21-month average. It’s getting support at $211.70, which is the 2018 high. Further, the shares bottomed near this number on Friday, low-ticking at the number $211.23.
The 2018 high may seem irrelevant, but look at how obvious this range was in late 2019 and the first part of 2020. This range was risky, highlighted by the wicks, but there were no complete closes above $211.70.
This continued for six months — until this past year.
A top company being lower by 30% from highs looks like a safe investment. Conservative traders can calculate their risk against recent lows and look for a rebound.
With a daily close under $211, it could place the monthly volume weighted average price measure close to $197. It could also cause the 200-week moving average, which is currently near $187, to come into the play.
Those would be negatives to watch.
But on the positive, look for a return back to the stock’s 50-week moving average close to $240, followed by the 10-month moving average, which is currently around $246. When and if we reach the latter, the 200-day moving average becomes important.
Although it could take time for the stock to fully recover, it seems like a good dip to buy for hungry bulls.
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