Alibaba Stock Forecast: BABA shares buoyant ahead of Tuesday earnings

Alibaba shares rose 2% at Monday's open after climbing gingerly up a smidge over 1% in Monday’s premarket along with the S&P 500 and NASDAQ futures. Investors are probably hoping that the horror of last week’s harsh Chinese regulatory measures is behind it. Alibaba management plans to unveil the most recent quarter's earnings tomorrow, August 3, before the market opens. Analyst consensus calls for earnings per share (EPS) of $2.21 on revenue of $32.3 billion, but there has been a drove of reduced forecasts in recent weeks.

BABA news: Will the regulatory clouds return?

Alibaba shares (NYSE: BABA) dropped 1.2% on Friday to $195.19 – nothing to worry about but it did fare worse than the NASDAQ Composite (-0.7%) and the S&P 500 (-0.5%). The session did appear rather optimistic when you factor in that it traded as low as $189.94 early on. That is why despite the open gapping down, the daily ends with a rather substantial green candle. Still Baba stock does not seem like it has the energy to tackle the 9-day Simple Moving Average (SMA) just above it.

To recap, just a week after BABA’s all-time high in October 2020, Chinese regulators abruptly suspended the IPO of subsidiary ANT Financial, which was only the beginning of the government’s crackdown of Chinese internet and cloud companies. The waves of Chinese stock mutilation were reenergized earlier this month the day after Didi Global (NASDAQ: DIDI) held its US IPO. Chinese regulators suspended new registrations for DIDI’s app and brought a heap of scrutiny toward its user data practices. After that, both Tencent and Baidu received steep fines, and ByteDance was also summoned by regulators for discussions.

Bloomberg reported last week that China has demanded major security fixes and consumer protections from 25 large tech companies, including Alibaba. Cathie Wood’s ARK Invest has sold off many of its top Chinese tech names entirely. Many observers note that Chinese government scrutiny seems aimed primarily at Chinese tech stocks that have listed their shares on US exchanges.

Alibaba (BABA) key statistics

BABA stock: Can it regain $200?

BABA stock cannot sit near such an important psychological level forever. It must break above $200 this week and quickly. Otherwise, too much time below will give all but the truest believers the notion that the regulatory considerations outweigh the promise of this tech juggernaut. First, the 9-day SMA at $199.52 must be conquered before a close above $200 signals demand. To break out of this sluggish season, BABA then needs to close above $206.47, the top of the descending trend line.

BABA shares have traded within this descending triangle for the most part since October 27 of last year. It did briefly perform a false breakout in mid-June, but the bulls were overwhelmed within a week. Again BABA’s stock price peaked its head above the trend line in mid-July, but that time lasted even less. Now, the 50-day SMA provides an even starker resistance barrier at $211.51. The downside only appears to have significant support at $180, which may scare off some investors. As FXStreet wrote last week, “the stock is selling off steeply in the premarket near $190, a psychological barrier. If major institutions decide to sell, then investors should brace themselves for another test of the $180 level.”

BABA daily chart

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