Chinese e-commerce big Alibaba Group Holdings Limited (BABA) is buying and selling decrease by greater than three% in Thursday’s pre-market session after reporting in-line third quarter 2019 revenues and beating earnings per share (EPS) estimates by a large margin. Revenues rose a formidable 37.7% yr over yr to RMB 161.5 billion, or round $23.1 billion. Renewed fears about the coronavirus outbreak could have dampened a extra bullish response, with world bourses turning sharply decrease in a single day in response to the newest information.
Alibaba inventory has outperformed different Chinese equities throughout the outbreak and was buying and selling simply seven factors beneath January’s all-time excessive forward of this morning’s report. Even so, it has been a wild trip up to now in 2020, with wild worth swings conserving buyers with weak stomachs on the sidelines. Unfortunately, excessive volatility is unlikely to ease till outbreak numbers flip sharply decrease and native industries resume regular operations.
BABA Long-Term Chart (2014 – 2020)
The Hangzhou, China-based firm got here public on the U.S. exchanges in September 2014, opening in the low $90s and dropping into the low $80s a number of weeks later. The subsequent uptick reached a brand new excessive in October, forward of continued upside into the November peak at $120.00. That marked the highest excessive for almost three years, giving solution to a multi-wave correction that posted an all-time low at $57.20 in September 2015.
A profitable February 2016 retest carved the final leg of a double backside reversal, setting the stage for a powerful uptrend that accomplished the spherical journey into the 2014 excessive in May 2017. An quick breakout attracted regular shopping for curiosity, including one other 86 factors into the January 2018 peak at $205.69. A June breakout try failed, yielding a downturn that broke 12-month vary help in the $160s in August.
The downtrend discovered help close to $130 in November and December, giving solution to a two-legged advance that reached the 2018 excessive in December 2019. The inventory broke out a number of days later and posted an all-time excessive at $231.14 on Jan. 13, when the virus outbreak triggered a steep reversal. Price motion since that point marks an ongoing take a look at of the December breakout, with violent swings throughout that degree highlighting the battle between bulls and bears.
The month-to-month stochastic oscillator crossed right into a long-term purchase cycle in September 2019 and reached the overbought zone in December. It has now posted a bearish crossover that can set off a promote sign if the blue line drops beneath the 80% degree. That would take only a few down days at this level, warning shareholders that the December breakout may quickly fail and set off a larger-scale decline.
BABA Short-Term Chart (2018 – 2020)
The on-balance quantity (OBV) accumulation-distribution indicator topped out in June 2018 after a protracted accumulation part and turned sharply decrease, posting a two-year low in January 2019. It posted an excellent decrease low when the second quarter sell-off posted the next low, producing a bearish divergence that resolved for one or two January 2020 periods when worth and quantity posted new highs. Unfortunately, excessive volatility since that point has dropped OBV beneath 2018 resistance, elevating the odds that worth will quickly observe.
It is smart for sidelined buyers to take a seat on their fingers, watching the buying and selling vary in place since mid-January. Right now, worth motion has drawn the define of a symmetrical triangle that often marks a continuation sample, however confidence is low as a result of the broad worth swings. In any case, this inventory will take its lead from native headlines, which could not enhance till this spring when the climate will get sizzling in China.
The Bottom Line
Alibaba is buying and selling decrease after a powerful quarterly report, with buyers extra centered on the potential impression of the coronavirus on future earnings.
Disclosure: The writer held no positions in the aforementioned securities at the time of publication.