For those who followed the news surrounding Alibaba yesterday evening, it was indeed a wild roller coaster. The pre-market volume was insane with huge swings of between $5-$10 happening within minutes.
For those unfamiliar with what’s happening, in recent time, we have seen somewhat of a revival in Chinese stocks. This is fueled by both the improving Covid-19 situation in China as well as what we consider to be the “relaxing” of government regulations on Chinese tech companies.
While the external environment can influence a company’s stock price, respective companies do indeed have their own individual catalyst such as major management changes, massive mergers etc.
With Alibaba, the one catalyst that everyone has their eyes on is the revival of ANT’s IPO. What exactly is ANT and can this one single event mark the end of the bear rally for Alibaba? We’ll find out soon enough!
What is Ant Financial?
As this article is more focused on current events, I won’t be going too deep into the saga involving ANT Financial. In summary, the stage was set for Ant Financial to be “the most successful Fintech in the World“. Or at least that was the case back in 2020. Things took a massive turn for the worst just 48 Hours before their IPO debut with Chinese regulators stepping in to halt the listing.
Long story short, the news just kept getting worst for Alibaba ever since that faithful November of 2020 with the stock falling from as high as $319 to a low of $75 just last month.
What happened last night?
- ANT IPO Revival Rumours @ 4.47pm
- Alibaba Spikes from $114~ to $127~ in less than 30mins.
- ANT IPO Revival Rumours SHUT DOWN @ 7pm
- Alibaba Sell off from $124~ to $114~ in less than 30mins.
With the news above, the spotlight is now once again on the topic of the ANT IPO as rumors of their IPO surfaced at about 4.47pm yesterday . It is unclear if the tweet came first or if news reported it first but either way, the FOMO kicked in during the premarket. What is interesting here is how quickly Chinese regulators came in to deny any talk of revival and with that, the stock sold-off almost instantaneously.
Would ANT IPO be a “golden-cross” moment for Alibaba?
What could have been another fantastic trading day for Alibaba turned to ruin simply due to rumors being quelled. This then begs the question if investors should take any positive news of ANT’s IPO as some kind of “golden-cross” moment to go long on the stock.
Based on the factual information, I do think that ANT’s IPO will have a positive impact on Alibaba as Alibaba does have a 33% stake in the company. Futhermore, if we look back in 2020, there was indeed a direct correlation between the “hype” surrounding ANT’s IPO and the price action of Alibaba.
Apart from that, based on the technicals, this is what I observe,
- The 50 Day MA (Blue Line) can be deemed as a dynamic resistance level for Alibaba.
- We are seeing underlying strength in the price action with the most recent breakout past the 50 Day MA (Yellow Circle).
- Price action failed to break past the 200 Day MA (Red Line). It can be considered a minor reversal should we see the price action test the 200 Day MA. (Green Circle)
- Highlighted Purple Range of Between $112 & $120 is an area where both bulls and bears have locked horns for a very long time. We will continue to see strong volatility in this range.
Are such rumours an indication of better days ahead?
In my opinion, it is difficult to determine a reversal based on news as we never really know when the bad news will end or when the good news will start. Alibaba is indeed very tricky as many support levels in the past have been broken.
Personally, I would conclude that if we do see a real golden cross form on the technicals, I’ld most certainly take that as sign to go long. However as impulsive as I am, I’ve treated every opportunity where the price fell below $100 to be a minor opportunity to take a small nibble.
P.S. if you’d like to learn to read charts and find profitable trades, join Robin Ho at his upcoming webinar to learn how he does it for a living.