Alibaba stock analysis: a good time to buy?

Investors seem to be accumulating Alibaba stock at lower levels

The Cyberspace Administration of China (CAC) ordered smartphone app stores to remove global ride-hailing company Didi Global on allegations that the company had illegally collected users’ personal data. This crackdown on Didi, just four days after its trading debut on the New York Stock Exchange on 30 June, soured sentiment towards the company and several Chinese stocks listed in the US.

That was followed by fines imposed on Alibaba (NYSE: BABA) and other technology companies on 7 July by the Chinese regulator for failing to report past merger deals. Although the fine was a paltry 500,000 yuan ($77,000) on each company – and no match with the massive $2.8bn antitrust fine given to Alibaba in April – it still unnerved investors and the Chinese stocks listed in the US fell on the news. 

China’s clampdown on the tech giants has resulted in their massive underperformance when compared with the mega-cap technology companies in the US. As Bloomberg reported an equal-weighted basket of Chinese tech stocks comprising Baidu, Alibaba, and Tencent have underperformed the US basket, made up of Facebook, Apple, Amazon, Microsoft, and Alphabet, by about 42% in the 12 months through to 9 July.

Oppenheimer & Co’s analyst Bo Pei said that Alibaba’s customers are loyal to the brand and the company is attempting to penetrate lower-tier markets, which may be positive for the stock. Pei has assigned a target price of $310 for Alibaba.

Should investors consider the strong fundamentals over regulatory uncertainty and accumulate during the current weakness? Will Alibaba’s stock go up? Read our BABA stock analysis to find out.

Alibaba share price technical analysis: weekly chart

Alibaba’s share price has been in a downtrend since hitting the all-time high of $319.32 on 27 October 2020 on NYSE. The stock broke below the uptrend line last week, but the positive sign is that the bears have not been able to capitalise on this breakdown.

The bulls have pushed the price back above the uptrend line, indicating strong buying near the psychological support at $200. But the bulls are unlikely to have it easy, because the bears will defend the downsloping 20-week exponential moving average (EMA).

If the price turns down from this resistance, bears will make one more attempt to break and sustain the price below the $200 support. If they succeed, the stock could extend the decline and slump to $170.

Contrary to this assumption, if bulls drive the price above $230.69, it will indicate that the selling pressure is reducing. That could open the doors for a rally to the 50-week simple moving average (SMA).

The Alibaba stock price analysis of the weekly chart shows that bulls are attempting a comeback, but can they pull it off? 

Alibaba share price technical analysis: daily chart

Alibaba’s share price broke above the downtrend line of the falling wedge pattern on 25 June, but the bulls could not sustain the higher levels. The stock turned down and re-entered the wedge on 2 July.

The bears tried to sink the price below the wedge on 8 July, but the strong rebound off the support line of the wedge indicates buying on dips. The bulls are likely to face stiff resistance at the downtrend line, however.

If buyers can drive the price above the downtrend line, it will be the first sign of strength. The bullish momentum could pick up after the price breaks above the swing high at $230.69. The stock could then rally to $246.61 and later to $274.07.

This positive view will become invalid if the stock returns from the downtrend line and plummets below the support line of the wedge. 

Alibaba: stock buy or sell at these levels?

The Alibaba stock price analysis shows the bulls are attempting a strong comeback. A breakout and close above the downtrend line will be the first sign of a possible change in trend. The stock could then start its northward march toward $274.07.

Conversely, a break below $198.12 will suggest that bears have overpowered the bulls and that may result in a decline to $170.

As with all such analysis, it is important for you to conduct your own research. Your decision to trade will depend on what your attitude to risk is, your expertise in the market, the spread of your investment portfolio and ultimately how comfortable you feel about losing money.

Trade Alibaba stock – Alibaba shares price

Alibaba Group Holding Limited
Daily change
111.92
Low: 110.96
High: 122.14

Further reading:

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