In a holiday-shortened trading week, Alibaba did not deliver gifts to its investors. Instead, it handed out coal, falling 13% on Friday and 15% for the week.
At its low on Friday, the shares were down nearly 18% as investors sold hand over fist.
At the lows near $211, Alibaba stock was down almost 34% from the highs on Oct. 27. What happened in less than two months?
First, the Ant IPO was pulled just days ahead of its public debut. Given that Alibaba holds a one-third stake in the company, this was a negative catalyst and the charts clearly show as much.
While the Ant IPO has been delayed due to regulatory issues, new regulatory concerns aimed at Alibaba were the latest catalyst for the selloff.
As we approach 2021, this seems more like a buying opportunity than a selling opportunity. Management must agree, as the company is now upping the size of its share repurchase plan.
Trading Alibaba Stock
Because of the negative catalysts above, look at the way Alibaba stock has unwound over the past two months. After rising for seven straight months, the bulls took a painful gut punch.
However, not all hope is lost.
First, the stock is finding support at its 21-month moving average. It’s also finding support at the 2018 high of $211.70. The shares bottomed close to this mark on Friday, low-ticking at $211.23.
While the high from 2018 seems somewhat irrelevant, look at how notable this area was in late 2019 and the first half of 2020. This area was trouble, highlighted by all the wicks above this mark, but no solid closes above $211.70.
This went on for six months -- until this summer.
Down about 30% from the highs for a high-quality growth company seems like a safe place to dip one’s toe in the water. Conservative traders can measure their risk against the current low and look for a rebound.
On a daily close below $211, it could put the monthly volume weighted average price measure near $197. It could also put the 200-week moving average in play, currently near $187 (not pictured in the chart above).
Those would be areas of interest on the downside.
On the upside, look for a rebound back to the 50-week moving average near $240, followed by the 10-month moving average currently near $246. Near the latter, the 200-day moving average also comes into play.
Although it may take time for a sustainable recovery to take place, this seems like a reasonable dip to buy for patient bulls.