Alibaba Stock News and Forecast: Is it time to buy BABA stock?

Alibaba stock closed lower on Tuesday despite other Chinese tech names bouncing.
BABA stock though is up 20% in Wednesday's premarket as Chinese regulators signal positivity.
BABA needs to recover as the stock has been struggling for the past year.

Ivan Brian FXStreet

Alibaba (BABA) stock is making a break for it in Wednesday's premarket with BABA soaring by as much as 20% in early light trading. Chinese tech stocks are one of the most beaten-down sectors of the market this year as investors bailed out over continued regulatory fears and delisting woes. This led many top Chinese tech names to also list in Hong Kong, but even that did not seem to stem the flow of selling. Now, however, things may be due to a turnaround as Chinese regulators make encouraging statements about investment and capital markets.

Alibaba Stock News

China's State Council Financial Stability & Development Committee (FSDC) said on Wednesday that it supports capital markets and welcomes institutional investors to increase their holdings. Bloomberg has gone into further detail saying China's top financial body has sworn to ensure stability in capital markets and support overseas stock listings. The last statement is likely the most important one and removes some of the delisting fears that were swirling around BABA stock and other Chinese names. The Central Bank of China's governor also said the People's Bank of China would help implement the policies. Alibaba subsidiary ANT Group has also reportedly eliminated its stake in 36KR Holdings to try and comply with regulations.

Alibaba Stock Forecast

Phew, what a move. First, Alibaba stock needs to close the gap up to $86 from the gap opening on Monday. If premarket gains hold, this will be achieved. We get the nice psychological $100 level next, which also is the last significant low from earnings on February 24. Those earnings were not that bad with a beat on earnings per share (EPS), and BABA stock attempted to go higher before the deteriorating macro backdrop set in. The Relative Strength Index (RSI) has just about pushed into strongly overbought at 20, so this will have worked out nicely. We use 20 as overbought, not 30, as it filters out a lot of false signals and leaves only the good ones, such as this.

Alibaba (BABA) chart, daily

The weekly chart shows the real big test comes at $110.

BABA chart, weekly

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Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

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