Alibaba Facing Key Support At $210 Level

Chinese internet giant Alibaba (BABA) has been under a lot of scrutiny over the past year, scrutiny from Chinese regulators and scrutiny from investors it would seem. The company saw its stock nearly double from March ’20 through October ’20, but then the stock plummeted 34% from October through its low in December.

The big drop brought a key support/resistance level into play once again. We see on the chart how the $210 area acted as resistance in June ’18 then the stock danced around the area during the first quarter of 2020. The stock did drop significantly below the $210 level at the low in March ’20, but that was an exceptional period in the market and many key support levels were breached for a great number of stocks.

Some technicians would argue that the $21o level isn’t all that important because of the way the stock bounced back and forth across the price level in the first quarter of 2020, but I consider that period to be a black swan event. What really got my attention on the chart was how the area was resistance in 2018, support in December ’20, and now appears to be acting as support once again.

Something else that I took note of on the chart is how the stock is oversold based on the weekly stochastic indicators. The indicators did just make a bullish crossover and if we look back at similar moves from the past few years it has been a good sign for the stock in most cases. We see bullish crossovers from low stochastic readings at the lows in June ’18, March ’20, and December ’20. Each of those signals led to a decent rally.

Fundamentals are Good, but not Great, and Not as Good as They Used to Be

Alibaba has seen solid earnings and revenue growth in recent years, but the growth rates have come down a little in the last year. I recommended the stock to subscribers of my newsletter on March 19, 2020. At that time earnings had grown by 47% in the most recent quarter and now the most recent report shows growth of 21%. The annual average growth rate was 28% then and remains there now. Analysts only expect earnings to grow by 1% in 2021 and when I wrote my summation last March analysts were expecting earnings growth of 27% in 2020.

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