PreMarket Prep Stock Of The Day: Alibaba's Ugly Chart Gets Support From Munger


Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

One of the hardest hit issues in the technology sector sell-off is Alibaba Group Holding Ltd. BABA. In fact, it has been in retreat mode since last October and at least one large long-term investor is attempting to “buy the dip” or in this case the “extended dip.”

Whether or not the issue has found a tradeable bottom was discussed on Wednesday and is the PreMarket Prep Stock Of The Day.

Ugly Chart: Since peaking at $319.32 one year ago, Alibaba has been under extreme selling pressure. The company has come under intense scrutiny from the Chinese government for its business practices.

Beginning in November 2020, the issue has been lower in eight of the past 11 months.

In addition, it's in the red by about $4 so far this month at its current price of $144.50. The issue has been more than halved over this stretch and is trading at levels not seen since January 2019.

The Player: Charlie Munger, vice chairman of Berkshire Hathaway, through his company Daily Journal Corporation DJCO has increased his stake in Alibaba shares by 82% since July as the stock's price has plummeted.

The Daily Journal purchased 136,740, shares bringing its total to 302,060 shares. As a result of the drop in price, the firm's position only increased to $45 million from $37 million.

PreMarket Prep Take: When the issue was being discussed on the show it was trading at the $141 area. Dennis Dick, who is already long Alibaba and looking to add to his stake made this statement: “If you do not think the company is going to be further impacted by the Chinese government, then the issue is dirt cheap. If you are going to attempt to buy the issue, you have to lean on the low of move ($138.43).”

The full discussion on the issue from Wednesday’s show can be found here:


Price Action: After a lower open ($140.56 vs. $143.14), the issue continued lower. It found support ahead of Tuesday’s low ($139.19) at $139.86 and reversed course. At one point, it was higher by nearly $2 when it peaked at $144.89. It has retreated off that high to the mid $143 handle.

Moving Forward: The further the issue can distance itself from the current low of the move, the better. The reason being, other potential longs who feel they have missed the bottom (whether short or long-term) will have to raise the bids in order to take a long position in the issue.

Of course, no negative news on the company out of China may allow the issue to recover some of its recent losses. If the issue can recoup its September month-end close ($148.05), more of a case can be made that the issue has been put in place a short or long-term bottom.

Photo: Courtesy of Alibaba

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