Alibaba Group Holding Ltd (BABA)

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Buy, Sell or Avoid Alibaba After Its Record $2.8 Billion Fine?
By: TheStreet | April 12, 2021

• Alibaba is enjoying its best day in months. Is it time to take profits, get long or avoid altogether? Let's look at the chart.

Alibaba (BABA) has been its best single-day performance in months, up about 9% on Monday.

The move came after the company was hit with a fine from Chinese regulators. The $2.8 billion fine represents 4% of Alibaba’s 2019 revenue and resulted in a record fine in the country.

While large, the fine was less than the maximum that could have been levied, at 10% of revenue. Further, it was smaller than investors had been fearing.

Perhaps more importantly, it has investors looking forward instead of focusing on China’s antitrust crackdowns. That’s been a huge cloud over the stock for several months now - after the Ant IPO was derailed.

Management has said the fine will not result in any material impact. As co-founder and Vice Chairman Joseph Tsai said, "We're happy to get the matter behind us.”

While mega-cap tech stocks like Microsoft (MSFT) and Facebook (FB), the Nasdaq and others indexes have been trading better, Alibaba has been a notable laggard.

Is that about to change?

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Trading Alibaba


Daily chart of Alibaba stock.

Chart courtesy of TrendSpider.com

Monday's rally in Alibaba stock has been a long time coming, particularly as shares looked like they may be setting up for another test of the December low.

The stock has been drifting down to the $220 area before bouncing, and on Friday Alibaba had its lowest close in a few weeks.

Now rallying higher, shares are back over the 10-day, 21-day and 10-week moving averages. However, the stock isn’t out of the woods quite yet.

It was rejected by the March high at $242.79 and key resistance zone between $240 and $242. At the top of the range also sits the 50-day moving average.

This presents both a hurdle and an opportunity.

On the one hand, current resistance is a clear hurdle. If shares are rejected from this area and fail to hold the 10-week moving average, look for a move below Monday’s low and a possible retest of the $230 area.

However, the opportunity at hand is also clear: Close above resistance and it clears the way for more upside.

If Alibaba stock closes above $243, it puts the 100-day and 21-week moving averages in play. Above that opens the door to the gap-fill level up near $262.

For now, keep an eye on $243.

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