A billion people can’t be wrong, right? If investors can take solace from an often quoted saying, then Alibaba (NYSE:BABA) may be worth a closer look. But if buyers are needing other similarly large and substantial reasons to purchase shares, it may be time to examine the BABA stock price chart. Let’s see what’s happening off and on the Alibaba price chart, then offer a risk-adjusted determination to help investors position more successfully.
This past month when diversified tech giant Alibaba reported its latest quarterly results, investors opted for worrying over a profit miss.
These investors dismissed the company’s rather than stronger-than-forecasted sales and burly revenue year-over-year revenue growth of 64%. As a result, shares of BABA finished troublingly lower by 6.6% and just shy of a one-year low.
BABA Stock and a Milestone
BABA’s detractors also dismissed a significant milestone in reaching that session’s price discovery verdict.
As part of the report BABA’s management announced the company now serves 1 billion active users on its e-commerce platform. That’s no small feat, even for a company the size of Alibaba and often referred to as China’s Amazon (NASDAQ:AMZN) due to its similar business tendrils in retail, cloud and entertainment markets.
Can we blame Alibaba investors’ apparent indifference though?
As bad as the market environment has been in recent months for AMZN and many other sprawling U.S.-based tech giants, BABA has endured other challenges.
Not that Alibaba is alone in its misery. BABA investors could easily commensurate alongside shareholders of Chinese large-cap tech companies Tencent (OTCMKTS:TCEHY), Baidu (NASDAQ:BIDU), JD.com (NASDAQ:JD) and others. And much of that conjoined fear is related to Beijing authorities and ongoing threats of officials cracking down on monopolistic-looking enterprises.
There’s other burdens hanging over BABA stock as well.
Alibaba and its peers have also been victimized by lingering investor concern that Chinese stocks traded in U.S. markets could be delisted as the two superpower states clash amid bad actor cyber attacks and growing support for the Wuhan lab-leak theory.
So now is a bad time to buy BABA, right? Wrong.
BABA Stock Weekly Price Chart
Source: Charts by TradingView
All stocks, even the best ones such as AMZN or Apple (NASDAQ:AAPL) routinely correct. And as is the case right now in BABA stock, it often happens when bearish narratives rule the day.
The good news is for a stock of BABA’s caliber, and AMZN or AAPL for that matter, situations like these most often prove compelling opportunities to pick up growth at a discount. And today the price chart looks agreeable for this less popular and bullish outcome to play out in the weeks and months ahead.
Technically speaking and as the illustrated weekly price chart of BABA shows, shares have formed a second double-bottoming attempt this past month. The first attempt shown at the labeled “pivot #2” was a higher-low variation. Today’s pattern supports an undercut pivot in relation to both formation’s starting point last December.
Since forming May’s pattern low candlestick shares of Alibaba have bullishly signaled through a pair of inside candles. On the other hand, BABA has yet to trade above the engulfing pivot high of $225.29. Obviously, the lack of confirmation will have its share of critics. But while imperfect, I’m upbeat for the pullback’s chance for success given the double bottom’s sturdy lifetime channel support and bullishly-positioned stochastics.
For investors agreeable with a more bullish narrative and price action in BABA stock being closer by than not, I’d recommend a July $225/$250 collar combination.
Bottom line, this type of limited and reduced risk spread in Alibaba looks to capture profits as shares rally into the right side of the stock’s corrective base. Hopefully. But in the event today’s pattern fails to live up to its bullish underpinnings, this combination’s considerable protective value can help with deeper value buy decisions that happen down the road and which might otherwise be mistakenly avoided.
On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.