Alibaba Group (BABA) Bearish and Poised for Downtrend Resumption
Alibaba Group Holdings Ltd.’s (BABA) stock is on a clear downtrend trajectory on multiple time frames and potentially set for another leg down, despite its rise in the last couple of weeks. Though the Chinese e-commerce giant is the jewel of China’s burgeoning tech economy, there are many factors weighing against the company.
Alibaba’s founder and chairman, Jack Ma, recently announced that he will be stepping down in 2019. Ma has been the primary face and driving force behind the company’s parabolic growth. Without him, the company faces an uncertain future in the eyes of many investors.
More recently, November’s much-hyped ‘Singles Day’ in China has traditionally been a massive selling day for e-commerce companies, especially Alibaba. Though the company apparently smashed sales records that day, its sales growth at 27% was significantly slower than last year’s 39%. In fact, this year’s sales growth was the slowest it has ever been.
Finally, China’s economy and equity markets have been under heavy pressure since the beginning of the year. The bearish trend is strong and poised to get stronger, weighing on even the largest of Chinese stocks.
Although Alibaba is well known for consistently beating earnings and revenue expectations, the pressures on the company are heavy, and the path of least resistance is very likely to the downside.
Technically, BABA has already hit and slightly overshot both its 50-day moving average and the top of its descending 100-day linear regression channel. Additionally, Stochastics have entered overbought while most trend signals are pointing towards a strong downtrend. Overall, the technicals are suggesting an impending downside reversal and resumption of the bearish trend.
The Technicals Rating
The Technicals gives BABA a bearish rating of 3 (on a scale of 1-10, with ’10’ being the most bullish and ‘1’ being the most bearish). Below are some of the key technicals for BABA, as well as other relevant information that paints a moderately bearish picture of the stock:
- Price Position vs 200-Day SMA: -13.54% (below) – BEARISH
- Position vs 50-Day SMA: +1.16% (above) – BULLISH
- Position vs 20-Day SMA: +5.87% (above) – BULLISH
- 200-Day Trend Slope (Linear Regression): BEARISH
- 100-Day Trend Slope (Linear Regression): BEARISH
- Stochastics (14,3,3) Level: Overbought – BEARISH
- RSI (14) Level: In the Middle – NEUTRAL
- Position in Bollinger Bands: At Upper Band – BEARISH
- Sector (ETF: GXC) Long-Term 200-Day Trend: BEARISH
- Sector (ETF: GXC) Medium-Term 100-Day Trend: BEARISH
- Market (S&P 500) Long-Term 200-Day Trend: BULLISH
- Market (S&P 500) Medium-Term 100-Day Trend: BEARISH
- Short Interest Ratio: 13.95% – BEARISH
- Mean Implied Volatility (IV): 42.36% (52-week range of 24.16%-57.21%) – BEARISH
- Analysts’ Mean Target Price: $205.74 (far above current price) – BULLISH
- Last Earnings Reaction: Move Down – BEARISH
Overall The Technicals Rating for BABA: TTTTTTTTTT (3 out of 10) – MODERATELY BEARISH
IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Past performance is not indicative of future results. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.
Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.
Chief Market Strategist at The Technicals
With more than two decades of experience as an equity analyst for several major research firms, Don has covered individual stocks (both technically and fundamentally) across a wide variety of sectors and industries, including tech, financial, and retail. He has been quoted regularly in key financial media like Bloomberg and Reuters. Contact Don