When it comes to diversified tech giant Alibaba (NYSE:BABA), being an investor comes with its share of harassment. Nevertheless, it’s time to watch for a capitalist opportunity now that a key battle line has been crossed.
For U.S. investors, profiting in Chinese stocks has been more challenging these days. Many large-cap stocks and industry leaders in China ranging from Tencent (OTCMKTS:TCEHY), to China Mobile (NYSE:CHL), China Life Insurance Company (NYSE:LFC) or China Petroleum & Chemical Corporation (NYSE:SNP) have produced lackluster or negative returns in their U.S.-listed American Depository Receipts. And certainly the trade war has been a drag on stock performance.
But Alibaba stock has been different. That’s not to say it’s been easy. Still, the fact is BABA has gained about 23% in 2019. The return is more than the S&P 500’s climb of 18% and towers above U.S. tech giant Amazon’s (NASDAQ:AMZN) 13% year-to-date increase.
Why is Alibaba Stock Different?
So, what is the deal with shares of BABA? Alibaba stock has and continues to defeat investors’ fears within this macro-charged environment. Most recently BABA stock toppled Street profit and sales forecasts in mid-August.
To be certain, there’s always going to be something or someone trying to get investors to back away from buying Alibaba despite its successes. For some that might include recent reports the U.S. is considering delisting Chinese stocks. And that threat can’t be entirely ignored. Or maybe fake merchandise sales in the past or allegations of accounting shenanigans have prevented investors from taking action in BABA stock?
Okay, so there’s plenty of reasons not to buy BABA shares. But obviously those arguments don’t include price performance. Most important, Alibaba stock continues to come out on top despite headline warnings and a challenging market for Chinese stocks. Now and with BABA crossing an important battle line on the price chart, it’s time to put shares on the radar for a well-timed purchase.
BABA Stock Weekly Chart
As noted above, capturing BABA stock’s gains of around 23% hasn’t been a walk in the park. And as expressed, bad press isn’t likely to just disappear. The better news is I also don’t believe Alibaba’s impressive rally is finished. I see a solid entry for a risk-adjusted purchase of BABA stock.
The weekly chart shows that since failing from a breakout attempt to new highs last year, Alibaba stock has established a corrective symmetrical triangle base. It’s not perfectly formed with clear-cut pivots to define the pattern, but the essence of this bullish formation is there.
Following last week’s price action, shares of Alibaba are in position to confirm a bullish engulfing candlestick which puts BABA stock back above the 50% retracement level of the base, as well as the triangle’s apex line. With stochastics in a pullback set-up in neutral territory and on the verge of signaling a bullish crossover, the situation looks all the more promising.
How to Trade Alibaba
I’d recommend buying Alibaba shares above $174.88. This entry waits for the BABA stock price to confirm last week’s candlestick and reinforces the bias for continued upside in the bullish triangle pattern. If BABA rallies, a breakout through angular resistance near $185 might be watched for adding shares on strength and before looking to take partial profits in-between $195-$215.
For containing downside exposure in Alibaba stock, I’d keep an eye on the weekly stochastics to continue to support the position and set a modified stop-loss beneath $165 for a stronger risk-adjusted exit that offers sufficient evidence off and on the price chart for closing the trade.
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.