Technical analysis
Price | $ 129.81 | 52 weeks range | $ 108.70 - $ 274.29 |
Beta | 0.89 | Vlume/ average | 38.1m/ 23.6m |
Sector | Technology | Dividend | N/A |
Alibaba Group Holding Limited, also known as Alibaba, is a Chinese multinational technology company specializing in e-commerce, retail, Internet and technology.
Alibaba (BABA) is among those stocks that suffered the most in 2021, decreasing its share value by more than 40%. We believe the stock is now at an attractive price to begin building a position in BABA for the medium to long term.
Price
After hitting $ 320, BABA began a long decline bringing it to a current price of $ 130.00.
If we analyze the $ 110-130.00 price range we can see how this played the role of resistance in the first two years of listing, from 2014 to 2016.
The change of pace that took place in 2017 then saw this level play the supporting role: respected both in 2017 and 2018.
Today, after having tested the $ 110 again, the stock is consolidating again in this price range: a price that coincides with the bearish channel in place since September 2020.
The breakout of the 9MA and consolidation above $ 120 we believe could lead the stock to test the top of the bearish channel.
Indicators
Looking at the daily chart, we can see an alignment of the MACD with the current price action: the indicator is constantly below the 0 line, describing the bearish momentum of the stock. At the same time, we notice a slight recovery that could soon result in a surpass of 0.
RSI, we can see a clear divergence between the lows reached in the price and the lows in the indicator.
More interesting situation if we take into consideration the weekly chart: MACD, below 0, but slightly upwards and RSI in positive divergence with the price. On the latter, it is also possible to notice a clear bearish trendline, which if broken can act as an anticipatory signal of a change in trend.
Moving averages
As this is a longer-term trend, we consider both the 50MA as the first intermediate resistance and the 200MA as the second resistance.
A consolidation at $ 140.00 would represent a breach of the 50-day average and therefore a possible trend reversal. The 200-day average currently fluctuates on the upper part of the bearish channel, we believe that a breakout of it could be a further confirmation of the stock's possible change in trend.
Conclusions
BABA is currently in a well-defined bearish channel but we believe that the current price fluctuation represents an interesting entry point to be able to build a long position on the stock.
Considering a medium to long term time horizon, we believe that the optimal choice is to gradually increase the exposure on BABA to following price confirmations which we estimate to be at those levels: 1/3 of the position at $ 110-130.00, 1/3 to $ 190-200.00 and a 1/3 to $ 230-240.00.
First price range, which as previously explained represents a good entry point. The second range is estimated on a break of the bearish channel and trend reversal. Third and final range, estimated at the upside breakout of the strong resistance area at $ 230.00.
To understand our analysis even better, we also propose the weekly chart in which it is possible to notice more the divergence between the MACD-RSI indicators with the price fluctuation.
This analysis will subsequently be commented upon the achievement of the following prices $ 220.00 and $ 80.00
Although we have a medium / long-term vision for Alibaba Holdings, below, we also propose a second possible indication for the short term and much more subject to the volatility of the first months of the year.
Medium - long term
Entry range
[1/3] $ 110 - 130.00
[1/3] $ 190 - 200.00
[1/3[ $ 230 - 240.00
Target $ 300.00
Stop loss $ 55.00
Short - medium term
Entry range $ 110 - 130.00
Target $ 190.00
Stop loss $ 80.00
Graphs
OTB Global Investments
10 January 2022
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