We Might See a Rebound Soon
Great Company
I have said it before and I will say it again. Alibaba is a great company. They take in a ton of cash every quarter, and they already have a ton of cash on hand. Alibaba operates in the most populated country and the second biggest economy in the world. Currently the share price is below all major analysts valuations. This is the perfect mix for a successful company and a sound investment.
Big Trouble in Little China
Just like the chinese economy, Alibaba has not been performing well over the past few years. In fact, it is down roughly 75%. Perhaps 2024 will finally be a good year for Chinese equity markets. There are talks of supposed future stimulus measures in China that could provide a boost. But if the chinese government decided to throw more regulations towards certain sectors of the market, then investors would continue to lose confidence towards certain investments.
Ugly Technical Picture
The financial statements and the fundamental aspects of this company look great. But the technical picture is an ugly one.
The most important and obvious technical development is the fact that Alibaba's share price has broken down below a major support level to make lower lows on the weekly timeframe. The trend has been bearish all of 2023. So when is a good time to buy in?
Immediate-Term Trend
If you are lucky enough to catch Alibaba near its 52-week lows a couple of weeks ago, then you would be up around 10% at this point. The immediate trend is a strong uptrend. You can see this with the 4-hour candles in the chart below.
When is The Rebound
After a 10% rally, one might think that a rebound is in the works. So is it a good time to buy in now?
In the chart below, you can see how BABA has been traveling within this downward price channel for some time. Right now, the price is at the top of this price channel, which has acted as resistance in the past. We might see another rejection at this resistance if short-term traders take profit here after a 10% rally.
Breakout or Rejection?
I should mention that if the price does climb above the trending resistance level, then there is a nice sized gap in price that could get filled.
Slightly Overbought
Climbing above resistance will bring the price out of the technical downtrend on the daily candles. But the faster oscillator in KDJ is showing overbought conditions. For this rally to continue, one might expect at least a tiny bit of selling after a 10% rally with slight overbought conditions. But keep in mind that during a strong rally most oscillating indicators will stay in overbought territory for a while.
Also take note that the daily RSI is above its 50 value which is bullish territory. As long as RSI stays above the 50 value then the very short-term bullishness will be confirmed.
Possible Swing Trade Opportunity
The larger timeframe with weekly candles shows another clear downward price channel. If this trend continues then we might see a rebound off of the lower support level of this channel. Like I mentioned, BABA is already up roughly 10% from the bottom of the channel.
If the price breaks out to the upside of the price channel on the daily candles that I already mentioned, then we might see a continuation of the rally all the way up towards the top of the price channel on the larger timeframe.
The major subindicators on the weekly candles don't paint a bullish picture but the oversold conditions in KDJ could warrant a possible buying opportunity for a short-term swing trade. There is even a slight bullish divergence in the KDJ indicator which could add to the notion of a swing trade opportunity.
I should mention that ideally you would want to see RSI above its 50 value and MACD above its histogram to be confidently bullish. This is what you would see in an uptrend.
Conclusion
I like the idea of a possible rebound coming soon. I could see more upside in the very short-term since the price is still down over 20% from the previous highs printed several weeks ago.
Personally I need to see the price breakout above the price channel that I mentioned. I also need to see the price climb back above the major support level that I mentioned at the beginning of this post. That technical level is now a strong resistance level to watch. If I see these two things happen, then I might consider entering into a short-term swing trade. BABA has been disappointing me over the last few years so I will be cautious and secure some profit from time to time on the way up.
As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Don't invest money that you can't afford to lose. Give some of your investments time and know when to cut your losses.
Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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SpyderCallOP : @102640653 Check it out. I'm going to look at tencent next.
MonkeyGee : spectacular assessment!
SpyderCallOP MonkeyGee: Thank you very much
151326437 : Agreed
102640653 SpyderCallOP: Wonderful.few weeks ago it has consolidated 67-69 zone for about a week or so. Is anyone guess if it can hold . Volume accumulation around that range has been strong. Let’s see if the market maker wants support it or test it again before a strong spike. What I see is a strong spike to 100 hkd above is coming soon provided market hold its ground. Sone favourable data out of China. Data in 2023 has not been market friendly. Longer term im seeing it testing 165-175 hkd.in a year horizon. Just as what I’m looking currently at . Every sector in hongkong has been selloff . Namely few stocks , byd, nio, jd, meituan, Tencent, NetEase, bilibili n few more others. It is not problem with the company financial but is the investment community which has invested currently in other assets. Maybe a few weeks of favourable data in China consumer consumption and u might see markets running wild in Asia with large swings. It’s just an investment cycle . Anyway good luck
102640653 MonkeyGee: Thanks
WinningTrader : there no nothing really wrong in the fundamentals but stock price has fallen greatly from the highs till now highly undervalued. And we are not taking about a small company here. Whether how the price moves is greatly beyond any rational logic, greatly depends how the forces behind wants it to go.
SpyderCallOP WinningTrader: agreed. I wonder what is the real reason it has been beaten down?
Bad economic data, geopolotical fears, regulation on the tech sector in China, the somewhat economic decoupling of U.S. and China, Jack MA seemingly liquidating his entire holdings of BABA etc. It could be anything
What is your theory?
SpyderCallOP WinningTrader: The market can remain irrational longer than any portfolio can remain solvent. That is an old saying I've heard from traders several times in the past. That is why I stick to the trend, no matter how irrational it may seem.
Wei13 : Kakura
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