The Alibaba Group Holding Ltd stock (NYSE: BABA) opened with a large gap to the downside on Thursday, and continued to trade lower throughout the session, to eventually hit support at 212.00. The tumble was the result of news that China’s State Administration for Market Regulation opened an investigation into the company over monopolistic practices. On Monday, shares of Alibaba listed in Hong Kong plunged another 8%, after Chinese regulators ordered its affiliate Ant Group to rectify its businesses. This means that shares of the firm listed in the US may also fall today.
From a technical standpoint, Alibaba is trading below a prior uptrend line drawn from the low of March 23rd, as well as below a short-term downtrend line taken from the peak of October 27th. What’s more, Thursday’s dive took the share below its 200-day EMA, as well as below the key support (now turned into resistance) barriers of 241.00 and 231.00. All this paints a negative near-term picture in our view.
A clear and decisive dip below 212.00 may extend the slide towards the 197.00 zone, which acted as a support on May 27th and 29th, the break of which may carry larger bearish implications, perhaps paving the way towards the 170.00 territory, which is defined as a support by the lows of March 18th and 23rd.
Taking a look at our daily momentum studies, we see that the RSI fell below 30 and continues to point south, while the MACD runs below both its zero and trigger lines, pointing down as well. Both indicators detect strong downside speed and corroborate the case for further declines in this stock.
In order to abandon the bearish case, we would like to see a strong recovery back above 252.00. Such a move may bring the price above the downside line taken from the peak of October 27th, and may allow advances towards the 265.00 hurdle or the 271.00 barrier, marked by the highs of December 17th and 4th respectively. Another break, above 271.00 may open the path towards the peak of November 24th, at 280.00.
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