Alibaba’s Share Price at Risk: Technical Analysis Indicates Potential 15% Decline

5 months ago
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Alibaba Group Holding Ltd.’s shares took a hit following the release of its earnings, with a 1.4% drop in Hong Kong pushing the stock below a critical technical level. This decline has undone a previous bullish breakout pattern, specifically a head-and-shoulders formation, leaving the company’s January lows at risk of being breached.

Technical analysis now points to a potential downside target for Alibaba’s stock price at HK$59, indicating a further 15% decline from the price at which the stock closed on Friday. This prediction is based on the negation of the bullish breakout pattern and the breach of the key technical level.

Options traders are focusing on put options with high open interest set to expire on February 28, with strike prices at HK$67.5 and HK$62.5. These could provide some price support for the beleaguered stock.

The resistance zone for any short-term recovery in Alibaba’s stock price is identified between HK$72.5 and HK$75. This zone will be crucial in determining whether the stock can rebound or if it will continue its downward trajectory.

The decline in Alibaba’s share price comes after the company’s latest quarterly results, which led to a 4% drop in its American depositary shares (ADSes). The company’s total revenue and adjusted net income both fell short of analyst expectations, with the largest business unit seeing only a 2% revenue increase.

Despite an increase in its share buyback program by $25 billion, investors remained unimpressed. The buyback announcement, which usually boosts share prices, failed to make a significant impact in this case.

Alibaba’s recent downgrade by analysts has also contributed to the stock’s decline. The company’s slow growth in key segments and the market’s pessimism have further exacerbated the situation.

However, it’s not all doom and gloom for Alibaba. The company’s solid fundamentals, international earnings, and expansion in the West continue to generate cash inflows. The market sentiment towards the company remains mixed, with some viewing it as a hold for conservative investors and a speculative buy for those with a higher risk appetite.

As Alibaba navigates these challenging times, it will be interesting to see if the stock can rebound from its current lows or if it will continue its descent towards the predicted downside target.…Read more by BNN Correspondents

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