Investors weren't loving the quarterly report Thursday from Alibaba (BABA) - Get Alibaba Group Holding Limited American Depositary Shares each representing eight Report, with shares down almost 5%.
The drop came despite better-than-expected revenue but a miss on profit expectations. Management also provided full-year revenue estimates that were ahead of analysts’ expectations.
For many investors, they likely expected those results to give the stock a lift, particularly as shares have struggled to gain upside traction.
Coming into the report, Alibaba stock was down about 31% from the highs.
About a month ago, Alibaba was handed down a record fine from Chinese regulators. However, the fine was smaller than investors were expecting and Alibaba was bid higher as a result.
Bulls enjoyed the news, hoping it would put the company’s regulatory issues in the rearview mirror. While that may be true, the stock isn’t trading much better.
Perhaps Alibaba is simply suffering from the bear market in growth stocks. Maybe investors’ fear about Chinese regulators continues to persist and act as a headwind.
In any case, the stock continues to struggle finding bullish momentum - although that remains true for Apple (AAPL) - Get Apple Inc. Report, Amazon (AMZN) - Get Amazon.com Inc. Report and other mega-cap tech stocks.
When it comes to Alibaba, the action doesn’t look great as shares break below the low from December.
Notice how the $211.70 area was a big breakout spot in the first half of 2020, then strong support in December. Trading down into this area now, bulls would like to see this level again hold as support.
So far, it's not doing a great job.
Should Alibaba stock really break below this mark, look for a washout down toward the $200 level and the 200-week moving average. That level should provide the stock a bounce, provided the overall market is under strong selling pressure.
On the upside, we want to see shares close over $212. Whether that happens today, by the end of the week or sometime down the road though, isn't clear yet.
If it happens in the somewhat near term, look for a continued push up toward the most recent breakdown area, around $220 to $225. We'll also want to see if shares can reclaim the 10-week moving average.
Above these levels could put the $240 area in play, which has been resistance since the stock's selloff in February.
The bottom line: Keep an eye on $212. Below keeps $200 in play. Above it and we may have a low to trade against.