Great R/R for BABA short term, but could fall another 10-20%.
Hey friends. One of my friends (and 100% a 'boomer in the making') was looking for some info on BABA. His strategy is always "BTFD" , and he holds very the long term.
Looking at $BABA through a bullish perspective, it's in a decent oversold condition with a defined risk/reward. The weekly candle is a bullish reversal 'doji', and we're below the forming descending wedge (a typical "wave e"), plus the RSI is crazy oversold (weekly RSi has only been this low once or twice). Depending on what happens on Monday morning, you can buy at market open around 161 (likely no higher than 164), with a defined stop below the low of 152.39.
Looking at $BABA through a bearish perspective, you can see that China's S&P equivalent (the CSI 300 Index, bottom chart) is also weak, which means China ain't so hot right now. We're below all major moving averages, and our MACD is showing no sign of a reversal. Keltner channels are all trending down.
From a macro perspective, there's a lot of leftover tension from the trade war, and long term they're looking to do CNYUSD currency swaps (that is, swap all reserves and holdings from global USD to Chinese CNY, which will ease their reliance and dependency on playing nice with the US). I'm no expert, but they'll likely be selling USD and buying CNY, forcing the CNY up from increased demand. Therefore, because most of the CSI 300 companies 'holders' are denominated in CNY (I can't imagine many foreign holders of these companies), the companies will lose relative 'share value' to CNY. A temporary drop in China's stock market is a small price to pay for international autonomy and a shot at being the global reserve currency. Long term, they're looking to replace all trade partners with domestic solutions, so maybe my boomer-buddy has the best BTFD moment in history! There's actually a great Market Huddle Episode on China-USA Trade relations and the Triffin Paradox here
Below, here's the CNYUSD. Does that look bullish? If it does, their stock market is about to take a wee-plunge.
Good Luck!
Looking at $BABA through a bullish perspective, it's in a decent oversold condition with a defined risk/reward. The weekly candle is a bullish reversal 'doji', and we're below the forming descending wedge (a typical "wave e"), plus the RSI is crazy oversold (weekly RSi has only been this low once or twice). Depending on what happens on Monday morning, you can buy at market open around 161 (likely no higher than 164), with a defined stop below the low of 152.39.
Looking at $BABA through a bearish perspective, you can see that China's S&P equivalent (the CSI 300 Index, bottom chart) is also weak, which means China ain't so hot right now. We're below all major moving averages, and our MACD is showing no sign of a reversal. Keltner channels are all trending down.
From a macro perspective, there's a lot of leftover tension from the trade war, and long term they're looking to do CNYUSD currency swaps (that is, swap all reserves and holdings from global USD to Chinese CNY, which will ease their reliance and dependency on playing nice with the US). I'm no expert, but they'll likely be selling USD and buying CNY, forcing the CNY up from increased demand. Therefore, because most of the CSI 300 companies 'holders' are denominated in CNY (I can't imagine many foreign holders of these companies), the companies will lose relative 'share value' to CNY. A temporary drop in China's stock market is a small price to pay for international autonomy and a shot at being the global reserve currency. Long term, they're looking to replace all trade partners with domestic solutions, so maybe my boomer-buddy has the best BTFD moment in history! There's actually a great Market Huddle Episode on China-USA Trade relations and the Triffin Paradox here
Below, here's the CNYUSD. Does that look bullish? If it does, their stock market is about to take a wee-plunge.
Good Luck!