Since its IPO on September 22, Alibaba Group Holding Ltd BABA investors have been on a bumpy ride. After reaching nearly $100.00 on its inaugural day of trading, it declined to $82.81 before catapulting to $120.00 on November 13.
Technical Breakdown
One factor that reinforces the significance of that $120.00 high is that Alibaba has not been able to even come close to that elevated level during recent rallies. Therefore, all the players that chased prices between $115.00 and $120.00 are deeper in the red the lower the issue goes.
Those participants have been lowering their offers on rallies in hope to minimize their losses. As the charts indicate, sellers have come down from $115.00 down to $110.00, and may hit the panic button if the issues pierce the $100.00 level.
Why?
Over the past month, Alibaba has moved out of the spotlight as a “must own” issue to one showing poor relative strength during the market's march to new all-time highs. Whereas the "big boys" piled into the issue off the opening bell with huge buy orders in October, now the morning imbalances are mixed -- even some slated to the sell-side.
Perhaps the change of investors sentiment in the issue is symptomatic of the overall mood of the market. During the past few weeks, investors have wanted nothing to do with the momentum and high price earnings to ratios stocks, subsequently pouring into value stocks.
This phenomenon is best exemplified by the price action in the shares of Berkshire Hathaway Inc. Class B (NYSE: BRK-B) shares. It has made a new all-time high in nine of the last 10 trading sessions. More importantly, in Tuesday's bloody tape, it was still higher over $1.00 and made a new all-time high at $152.94, far exceeding Friday's former all-time high of $150.68.
Wall Street Analysts - Not Much Help
Wall Street analysts have not provided much guidance on the issue since the recent high. The only comments have come from Cantor Fitzgerald who maintained its Buy rating and raised its price target from $90.00 to $110.00 on November 14. In their opinion, any price over $110.00 was gravy and investors may want to steer clear of the issue until it has a significant pullback.
The Street high price target resides with HSBC Holdings, who initiated coverage with an Overweight rating on November 12 with a $148.00 price target. The Street low target resides with Goldman Sachs, which maintains a Neutral rating and a $104.00 price target.
Experts Take
Nic Chahine, Marketfy Maven and the author of "Creating Income With Options Spreads" is not too concerned about the recent price action. He characterizes the selloff as “easy come, easy go," and told Benzinga, "It is just the fact that it ran too far, too fast.”
Chahine attributes some of the weakness to overall market conditions, “If markets in general correct here, Alibaba won't be immune and will likely be treated as a momo. It will likely fair better than most other momos (Twitter Inc and Tesla Motors Inc) because it is NOT perceived as having Alibaba issues. So I will consider it long on dips where I can gauge any sort of ranges. No hurry though.”
'Must Know' Technicals
In addition to that level being a huge psychological support or resistance for investors, the $100.00 level has significance to technicians as well.
After large moves in any issue, technicians will wait for a retracement of that move to determine a lower-risk entry point or to determine if the current trend is or is no longer valid. The most common retracement followed is the 50 percent mark.
Since Alibaba has rallied from $82.81 to $120.00, the 50 percent retracement comes in at $101.45.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
|---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
