In the ongoing trade war between optimistic and more grizzly investors, Alibaba (NYSE:BABA) stock bulls are winning the battle off and on the price chart. Let me explain …
It’s been a tough full year for BABA stock. Over the past 12 months, shares are off around 9%. More to the point though, it’s been a constructive start to the new trading year off and on the price chart for BABA.
Shares of BABA are up roughly 24% in 2019. That’s more than double the approximate 11% gains in both the iShares China Large-Cap ETF (NYSEARCA:FXI) and the S&P 500 ETF (NYSEARCA:SPY).
Okay, so considering late 2018’s extreme bearish behavior, some investors might be quick to point out BABA stock’s performance is far from unique. That’s true, but remember those gains come in the face of pervasive trade war fear-mongering by pundits to not invest in China.
As well, global and US-based rival Amazon.com (NASDAQ:AMZN) is sporting a relatively weak YTD gain of just 8%. So, could there be something more to Alibaba at this point in time and going forward? I believe there is.
Off the price, in late January BABA handed investors an overall very solid earnings report. Overall sales of $17.06 billion did miss Street views of $17.68 billion. Still, strong above-view profits and oodles of double-digit year-over-year growth comps in areas like the cloud, retail, finance, food-delivery and even the quietly growing and important smart speaker market—support the case BABA is doing a lot more things right than wrong and reaping those rewards.
Alibaba Stock Weekly Chart
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In of itself, many will see this type of base as bullish. And in conjunction with a small ‘handle’ consolidation forming, the reversal formation looks even better for continued upside in BABA.
As with the earnings report net sales flaw, the current handle is slightly low within the base. The price action falls is battling the 50% retracement level, rather than being fully above it. However, with this area also holding the longer-term 200-day simple moving average; a breakout above the handle high of $173.09, if it occurs, should prove a powerful technical event.
For investors agreeable with what’s discussed off and on the price chart, I’d simply put BABA stock on the radar for purchase above the market if shares reclaim $173.09 and in the process, reaffirm the bullish picture.
Regarding money management, a fairly standard 8% stop-loss serves a dual purpose. First, the exit ensures investors keep potential losses small and the proverbial powder dry for future opportunities.
Secondly, unwinding a BABA stock position near $159 is also roughly 1.5% – 2.75% beneath the 38% retracement level and handle low. And bottom or squiggly price line, technically that would be an undesirable and ominous warning on the BABA stock chart worth stepping to the side for.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
