BABA Stock News: Alibaba could reverse off COVID-19 lows, but fears here to stay

  • BABA shares up in Wednesday premarket
  • The stock gapped down on Tuesday due to sector misgivings.
  • Chinese regulators have been on a tear, bashing nearly all major Chinese internet stocks.

With seemingly no end in sight for the “China techlash,” as yesterday’s new registration suspension for Tencent’s (TCEHY) popular WeChat app attests, investors in Alibaba (NYSE: BABA) may be growing weary. BABA stock is down nearly 42% since its high of $319.26 on October 27, 2020. The stock was up 2.6% in Wednesday’s premarket.

BABA news: Weight of crackdown rests on Alibaba’s shoulders

Just a week after BABA’s all-time high last October, 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 move against Alibaba now appears to be only the first in a series of anti-business measures when the regulatory onslaught was reignited earlier this month the day after Didi Global (NASDAQ: DIDI) held its US IPO. After that both Tencent and Baidu received steep fines, Tesla faced a firmware recall, and ByteDance was also summoned by regulators for discussions.

BABA shares are now trading in the same vicinity of their COVID-19 panic prices in the first half of last year. Tuesday saw the stock gap down nearly $6, and BABA fell as low as $179.72 in the intraday before rocketing back up to close slightly higher than its open at $186.07. This left a bullish doji in its wake that may trick some investors into thinking a reversal is afoot. With the dark headlines unlikely to suddenly abate and many US institutional investors already spooked, it is hard to have any optimism here – even at what seem to be cheap prices.

BABA chart: Where is the love?

The more risky or ambitious set of investors may be yet licking their lips when it comes to the Relative Strength Index (RSI). The last two times BABA reached a figure like Tuesday’s 28 RSI reading, the stock bounced into a more than a week-long ascending pattern. The same might happen here. The last two weeks, however, have witnessed unrelenting negative press and continued bearish trading patterns among the entire Chinese internet sector. A single new story involving a competitor could easily have the BABA faithful losing their religion.

For there to be a sincere rebound, Alibaba stock needs to close above $191.17 – the close from May 4, 2020. Below there is support near $188 and the COVID-19 lows at $170. Another worry is that the stock remains far below even its 9-day Simple Moving Average (SMA), which sits at $203.59. The 20-day and 50-day rise every $5 or so to $212.58, so it appears there is substantial resistance to breakthrough for any genuine, developed turnaround.

BABA 1-day chart

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