Chart of the Day: Alibaba Rises on Approved Ant Group Fundraising

01/04/2023

2 minutes read

2023.01.04 13:15

Ant Group’s consumer finance unit received approval to more than double its registered capital
Alibaba owns 33% of Ant Group, which operates one of China’s dominant mobile pay apps
Technical analysis suggests that Alibaba’s stock may continue to rise

On Wednesday, Alibaba Group Holdings (NYSE:) saw a significant increase in its pre-market gains in U.S.-listed Chinese stocks after Ant Group’s approved fundraising plan sparked speculation that the Chinese government’s regulatory clampdown on the internet sector may be easing.

This positive news, coupled with signs of recovery in China and a drop in , as well as expectations that the Federal Reserve will slow its , contributed to the overall increase in risk appetite and boost in stock and Treasury prices, as well as a decline in the value of the .

Tesla (NASDAQ:) also saw a rise in its stock in pre-market trading, potentially rebounding from Tuesday’s 12% drop, as investor Cathie Wood added to her holdings in the electric vehicle manufacturer, improving sentiment for the tech sector as a whole.

Additionally, the release of and inflation data, which showed an unexpected slowdown, added evidence of easing price pressure in the euro area. This, along with the lack of a deep recession and the presence of liquidity on the sidelines, has given investors hope for a potential rally in the year’s second half.

Market anticipation for the Federal Reserve’s , set to be released later Wednesday, and the highly anticipated later in the week also contributed to the positive market sentiment.

BABA Daily Chart

U.S.-traded Alibaba has completed Tuesday back-to-back falling flags, a congested range rife with intense trading. The pattern’s premise is that rather than the exchange being between bulls and bears, they are between tired bulls who want to rest after a dizzying rally and fresh bulls who will be all too happy to become exhausted in such circumstances.

Statistically, the move after the upside breakout repeats the initial action. Not for nothing, the pre-market rally stopped at those levels.

Based on the flagpole, the initial sharp advance before the range, the second flag’s implied target is about $109.

Trading Strategies

Conservative traders should wait for the price to retest the flag before risking a long position.

Moderate traders would buy the dip.

Aggressive traders could enter a contrarian short as the price nears the initial flag’s implied target, the $100 psychological round number, and Tuesday’s shooting star before joining moderate traders in the long position.

Trade Sample 1: Aggressive Short Position