Is Alibaba a Buy Amid Chinese Regulatory Worries?

Alibaba stock has been under constant pressure due to regulatory issues in China. Let's look at the charts to see if it's time to buy.
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What a rough ride it’s been for Alibaba  (BABA) - Get Report, as it continues to clash with Chinese regulators.

With tech stocks broadly under pressure, Alibaba has faced extra headwinds from the Chinese government. In fact, this obstacle has been in place for several months now.

It began with the nixed Ant IPO in the fourth quarter and has persisted since. It even caused a wave of speculation regarding the whereabouts of Alibaba Founder Jack Ma.

Most recently, Alibaba is reportedly being told to dump its media assets.

However, one analyst at Morgan Stanley made the case that it would be a positive for Alibaba to do so, as it would improve its margins and provide it with more capital. The analyst reiterated the firm's overweight rating and $320 price target.

The crackdown in China has affected others, too, like JD.com  (JD) - Get Report. The company was fresh off a strong earnings report when its momentum quickly reversed.

Like JD.com, Alibaba’s charts have gotten pretty sloppy. But long-term investors are starting to find value even though as the company goes through a rough patch.

Trading Alibaba Stock

Daily chart of Alibaba stock.

Daily chart of Alibaba stock.

After moving lower in Q4, Alibaba stock made a quick rebound off the prior 2018 peak high, almost tapping the 100-week moving average in the process. It quickly bounced, climbing into the $270s.

On the ensuing breakdown, though, the shares fell for seven straight days and in 10 of 13 trading sessions.

The shares ultimately bottomed at $226.53, a level Alibaba stock currently hovers near as investors try to figure out the next move.

I’m watching one of two things, the first being a “look below and fail” of this level. In other words, I am looking for Alibaba to break below or open below $226.50 and reclaim this level by the close, giving us a downside level to measure against.

The other thing I’m watching? For Alibaba to close below $226.53 and test into one or more possible downside targets. 

Those levels include the January low near $220, the 100-week moving average and finally, the December low at $211.23.

Currently, it's almost 30% off the highs and tech investors may consider scooping this name up with a multimonth or multiquarter outlook, even though momentum is clearly not in Alibaba’s favor.

On the upside, we need to see the shares clear the 10-day moving average, and then its VWAP measure, before even thinking about a prolonged rally.