Alibaba (NANNY) – Get report the stock has had a difficult run recently. The e-commerce giant’s shares rose nearly 1% on Monday, but this is after a painful end the week before.
In a week of negotiations shortened by the holiday, Alibaba did not deliver gifts to its investors. Instead, it distributed coal, dropping 13% on Friday and 15% on the week.
At its low on Friday, the shares fell nearly 18%, with investors selling hands-on.
At lows, close to $ 211, Alibaba’s shares fell nearly 34% from the highs of October 27. What happened in less than two months?
First, the Ant IPO was withdrawn a few days before its public debut. Given that Alibaba owns a third of the company’s shares, this was a negative catalyst and the graphs show this clearly.
Although Ant’s IPO was postponed due to regulatory issues, new regulatory concerns for Alibaba were the latest catalyst for the sale.
As we approach 2021, this looks more like an opportunity to buy than to sell. Management must agree, as the company is increasing the size of its share buyback plan.
Trading Alibaba Shares
Monthly chart of Alibaba stock.
Graphic courtesy of TrendSpider.com
Because of the negative catalysts above, look at how Alibaba’s shares have rebounded in the past two months. After climbing for seven consecutive months, the bulls took a painful punch to the stomach.
However, not all hope is lost.
First, the stock is finding support at its 21-month moving average. It is also finding support at the 2018 high of $ 211.70. Shares fell close to this mark on Friday, marking a low of $ 211.23.
While the 2018 high seems a bit irrelevant, see how remarkable that area was in late 2019 and the first half of 2020. This area was problematic, highlighted by all the wicks above this mark, but no solid closings above $ 211, 70.
This went on for six months – until this summer.
A drop of about 30% from the highs for a high-quality growing 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, this could put the weighted average price measure of the monthly volume close to $ 197. It could also bring into play the 200-week moving average, currently close to $ 187 (not shown in the chart above).
These would be areas of interest on the negative side.
On the positive side, expect a recovery back to the 50-week moving average near $ 240, followed by the 10-month moving average currently close to $ 246. Close to the latter, the 200-day moving average also comes into play.
While it may take some time for a sustainable recovery to occur, this seems like a reasonable dive to buy for patient bulls.