Alibaba plunged by 66% for the past year since October 2020, while the Chinese index, HK50, lost only 4.5% in the same period. As a result, Alibaba founder Jack Ma has lost the leading position in the list of the wealthiest Chinese people.
In this article, we will discuss the reasons for such a negative year and try to predict the future price movement according to the technical analysis.
Why did Alibaba drop so deep?
The main reason for this failure is the pressure from the Chinese government. The confrontation between Jack Ma, the founder of the internet company, and the country's leaders continued. It began at the end of 2020 when the businessman criticized the financial policies of the authorities.
The Chinese government asked Alibaba to sell a 30 percent stake in microblogging service Weibo, the Hong Kong-based English-language newspaper South China Morning Post, and stakes in the major media corporation Yicai Media Group and advertising company Focus Media.
A little earlier, the authorities announced a record fine of over $975 million on Alibaba for violations of antimonopoly legislation.
Experts and analysts were concerned that the general requirement for selling in Chinese reality "means taking away the asset" as no one guaranteed that Jack Ma will be allowed to choose a buyer and to set a price.
Bill and Melinda Gates were the first who realized the seriousness of the situation. They sold all their 500 000 stocks through their fund in February 2021. Later, in September 2021, Kathie Wood's fund sold all its Alibaba stocks.
Unfortunately, the pressure on the company did not end there. Alibaba stock lost 11% on November 19, after a worse than expected earnings report. The company's net profit fell by 87% to $524 million.
The company also stated that it expects 20-23% year-to-year revenue growth, which was below analysts' forecasts.
Finally, on December 3, the price kept the way down amid news that the company would reorganize its e-commerce business and replace its CFO.
As a result, the stock has reached the May 2017 level at $110.
What is next?
Stocks began the current week with growth as concerns about the severity of the omicron virus variant receded, and China pledged measures to support economic growth.
Chinese tech stocks also rebounded from last week's rout, with Alibaba soaring by more than 10%. On Tuesday's premarket, it is trading at $129.5, right below the resistance level of $130.
We would not be so optimistic about this bounce. The company might stay under pressure until the Chinese government resolves all issues with Alibaba's founder, whose statements hurt them a lot.
Technical analysis: Weekly chart
We can notice that the price has formed a lower low, which is not a good sign for the future of this stock.
Despite the price bounced off the $110 global support, and it has the bullish divergence on the weekly chart, it is still trading in the descending channel. Therefore, we suggest looking for buy trades only after the price breaks out of this channel or it closes the weekly candle above $135.
Before that, we expect another dump in the $110 area where the reversal double bottom pattern may appear. Afterward, the price will start its way up. In addition, the New Year's hype around online retails can positively affect Alibaba's revenue.
Therefore, by the end of the first quarter of 2021, the stock might reach the $190-$200 area.
- Support levels: $85, $110
- Resistance: $130, $150, $200
Fortunately, with FBS, you can earn on rising and falling stocks.
Don't know how to trade stocks?
1.First of all, be sure you’ve downloaded FBS Trader app or Metatrader 5. FBS allows you to trade stocks only through this software.
2.Open an account in FBS Trader or the MT5 account in your personal area.
3.Start trading!
Alibaba plunged by 66% for the past year since October 2020, while the Chinese index, HK50, lost only 4.5% in the same period. As a result, Alibaba founder Jack Ma has lost the leading position in the list of the wealthiest Chinese people.
In this article, we will discuss the reasons for such a negative year and try to predict the future price movement according to the technical analysis.
Why did Alibaba drop so deep?
The main reason for this failure is the pressure from the Chinese government. The confrontation between Jack Ma, the founder of the internet company, and the country's leaders continued. It began at the end of 2020 when the businessman criticized the financial policies of the authorities.
The Chinese government asked Alibaba to sell a 30 percent stake in microblogging service Weibo, the Hong Kong-based English-language newspaper South China Morning Post, and stakes in the major media corporation Yicai Media Group and advertising company Focus Media.
A little earlier, the authorities announced a record fine of over $975 million on Alibaba for violations of antimonopoly legislation.
Experts and analysts were concerned that the general requirement for selling in Chinese reality "means taking away the asset" as no one guaranteed that Jack Ma will be allowed to choose a buyer and to set a price.
Bill and Melinda Gates were the first who realized the seriousness of the situation. They sold all their 500 000 stocks through their fund in February 2021. Later, in September 2021, Kathie Wood's fund sold all its Alibaba stocks.
Unfortunately, the pressure on the company did not end there. Alibaba stock lost 11% on November 19, after a worse than expected earnings report. The company's net profit fell by 87% to $524 million.
The company also stated that it expects 20-23% year-to-year revenue growth, which was below analysts' forecasts.
Finally, on December 3, the price kept the way down amid news that the company would reorganize its e-commerce business and replace its CFO.
As a result, the stock has reached the May 2017 level at $110.
What is next?
Stocks began the current week with growth as concerns about the severity of the omicron virus variant receded, and China pledged measures to support economic growth.
Chinese tech stocks also rebounded from last week's rout, with Alibaba soaring by more than 10%. On Tuesday's premarket, it is trading at $129.5, right below the resistance level of $130.
We would not be so optimistic about this bounce. The company might stay under pressure until the Chinese government resolves all issues with Alibaba's founder, whose statements hurt them a lot.
Technical analysis: Weekly chart
We can notice that the price has formed a lower low, which is not a good sign for the future of this stock.
Despite the price bounced off the $110 global support, and it has the bullish divergence on the weekly chart, it is still trading in the descending channel. Therefore, we suggest looking for buy trades only after the price breaks out of this channel or it closes the weekly candle above $135.
Before that, we expect another dump in the $110 area where the reversal double bottom pattern may appear. Afterward, the price will start its way up. In addition, the New Year's hype around online retails can positively affect Alibaba's revenue.
Therefore, by the end of the first quarter of 2021, the stock might reach the $190-$200 area.
- Support levels: $85, $110
- Resistance: $130, $150, $200
Fortunately, with FBS, you can earn on rising and falling stocks.
Don't know how to trade stocks?
1.First of all, be sure you’ve downloaded FBS Trader app or Metatrader 5. FBS allows you to trade stocks only through this software.
2.Open an account in FBS Trader or the MT5 account in your personal area.
3.Start trading!
