- BABA shares break key support level on Friday.
- BABA results disappoint investors as fine from Chinese regulators hits.
- BABA may get support as RSI and CCI flag oversold conditions.
Alibaba (BABA) is the Chinese Amazon (AMZN) and with China being a country of nearly 1.5 billion people, that is an impressive marketplace.
BABA is one of China’s most successful internet companies and has a similar business model to Amazon with an online retail marketplace, a cloud business, and a fintech e-payments business called ANT Group. ANT Group was due to IPO in late 2020 but was pulled at the last minute after BABA and ANT founder Jack Ma gave a speech in which he appeared to criticize Chinese regulators and the banking industry. The IPO (Initial Public Offering) was canceled, and BABA's share price struggled, losing over 30% of its value.
Alibaba (BABA) reported first-quarter 2021 results before the open on Thursday. Revenue for the quarter was 187.395 billion yuan, an increase of 64% and ahead of the forecasted 180.41 billion yuan. The quarterly net loss was 7.6 billion yuan due to a fine from the Chinese regulator. Earnings per share adjusted (EPS) were $1.58, missing the $1.78 estimate.
Mobile monthly average users were 925 million, up 23 million from December.
BABA price prediction
Alibaba shares broke trendline support last week on Monday and Tuesday and are looking increasingly ugly. $219.97 was broken, meaning $211.23 was the next support level to target. This level was also broken as the market reacted poorly to the earnings number on Thursday. BABA shares closed down over 6% after the earnings release. Investors focused on the loss which was attributable to a fine from Chinese regulators. This is a source of continuous concern. Post the earnings release Keybanc and Raymond James lowered their price targets while Cathie Wood of ARK Invest fame sold stock.
Right now BABA is at a pivot point, retracing up to the $211.23 level on Friday but failing. Some confidence can be taken from the fact that both the Relative Strength Index (RSI) and Commodity Channel Index (CCI) are showing oversold conditions. This dual signal last occurred in December and the price of BABA shares did stage a nice bounce. The first target is to retake $211.23 and then the 9-day moving average at $219. This will then bring resistance at $237.75 and $244.65 into view.
A sustained break of $211.23 will bring $189.53 as the next target. There is a small buy zone here (highlighted in blue) so that may be a place to initiate a long position. Basically, a buy zone is one where the price has appreciated, stabilized, and then appreciated again. The logic is the price has moved up, stalled but not fallen. More buyers have powered through any sellers and taken the price higher. Basically a consolidation zone but confirming the trend. In this case, the zone was retested in early May 2020 before buyers again pushed BABA out of the zone.
To turn bullish, BABA needs to break back above the lower trend line and break the 9 and 21-day moving averages. This will then target the resistance at $237.75.
| Support | Resistance |
| 219.97 | 224.65 |
| 211.23 | 227.30 |
| 189.53 | 230 |
| 170 | 237.10 |
| 242-244 | |
| 274.29 |
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