The move came after the company was hit with a fine from Chinese regulators. The $2.8 billion fine represents 4% of Alibaba’s 2019 revenue and resulted in a record fine in the country.
While large, the fine was less than the maximum that could have been levied, at 10% of revenue. Further, it was smaller than investors had been fearing.
Perhaps more importantly, it has investors looking forward instead of focusing on China’s antitrust crackdowns. That’s been a huge cloud over the stock for several months now - after the Ant IPO was derailed.
Management has said the fine will not result in any material impact. As co-founder and Vice Chairman Joseph Tsai said, "We're happy to get the matter behind us.”
Is that about to change?
Monday's rally in Alibaba stock has been a long time coming, particularly as shares looked like they may be setting up for another test of the December low.
The stock has been drifting down to the $220 area before bouncing, and on Friday Alibaba had its lowest close in a few weeks.
Now rallying higher, shares are back over the 10-day, 21-day and 10-week moving averages. However, the stock isn’t out of the woods quite yet.
It was rejected by the March high at $242.79 and key resistance zone between $240 and $242. At the top of the range also sits the 50-day moving average.
This presents both a hurdle and an opportunity.
On the one hand, current resistance is a clear hurdle. If shares are rejected from this area and fail to hold the 10-week moving average, look for a move below Monday’s low and a possible retest of the $230 area.
However, the opportunity at hand is also clear: Close above resistance and it clears the way for more upside.
If Alibaba stock closes above $243, it puts the 100-day and 21-week moving averages in play. Above that opens the door to the gap-fill level up near $262.
For now, keep an eye on $243.