Alibaba Shares Crash Below Key Support

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Alibaba Shares Crash Below Key Support

Alibaba Shares Crash Below Key Support

Alibaba shares crashed below a key support level around $80/share in yesterday’s US trading session, despite the Chinese central bank’s efforts to shore up demand in the country. The PBOC lowered the reference rate for the yuan in back-to-back instances in an attempt to make Chinese products more affordable in the international market.

For some investors, this is a warning signal that the Chinese economy is in for darker days ahead. This followed the government’s repeated attempts to stem the bloodbath in the equity market last month, signalling that a glut in demand is taking place.

Alibaba shares have gapped down to the $74/share area, although the void could still get filled if profit-taking on the short positions takes place. RSI is still pointing down, reflecting how selling pressure is present, while stochastic is on the move up and suggesting that a bounce might take place.

Alibaba Shares Outlook

For some stock analysts, this drop might be a good time to invest in Alibaba shares since the easing efforts in China could soon translate to stronger revenues for the company. Take note, however, that the stock has been on a decline since late last year, just weeks following its successful IPO.

For now, the company’s numbers have been subpar, as the earnings report showed that revenue missed expectations. In its earnings statement on Wednesday, Alibaba said that in the quarter that ended June 30, revenue rose to $3.27 billion. Net income that excluded investment gains, which does not meet generally accepted accounting principles, was $1.5 billion, in line with analysts’ expectations.

Earlier this week, Alibaba unveiled a $4.5 billion tie-up with Chinese electronics retailer Suning Commerce Group Co., a move meant to broaden its gadget offerings, add to its logistics and provide in-person services to consumers. However, investors remained concerned about the company’s weakening grip on China’s e-commerce market.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.