The Daily Breakdown looks at Alibaba stock, which has pulled back to an interesting level on the charts. The NYSE suffers from a glitch.
Tuesday’s TLDR
- 📊 Alibaba has pulled back to key potential support.
- 🤔 Meme stocks were in focus on Monday…
- 😨 But the NYSE had other issues at hand.
What’s happening?
June is expected to have some fireworks and we’re already starting to see them.
Investors came into Monday’s session with a focus on meme stocks like GameStop and AMC Entertainment, but these names sputtered after opening near session highs and then faded into the close.
At the same time, the NYSE had some technical issues which resulted in temporary trading halts for about a dozen names, including Chipotle Mexican Grill, Berkshire Hathaway Class A stock, and Barrick Gold, among others.
As we look toward today, the job openings report — the JOLTs report — is in focus. So are earnings after the close from Crowdstrike, Hewlett Packard Enterprise, and PVH Corp., among others.
So far, the biggest focus remains the jobs report, which will be released on Friday. And of course, investors continue to await news on Ethereum ETFs and whether they will get the green light to start trading.
Want to receive these insights straight to your inbox?
The setup — BABA
Alibaba is a name that’s been on investors’ radar this year. That goes for institutional investors too, as fund managers like David Tepper recently made Alibaba his firm’s largest holding, according to its latest 13F filing with the SEC.
While shares have shown bursts to the upside lately, it’s been a huge laggard. Alibaba is flat so far in 2024 and remains about 75% off its high from October 2020.
However, that lagging share price and low valuation — shares trade at just 9.3 times this year’s adjusted earnings expectations — have investors intrigued.
The price action has been volatile lately. After a strong rally up toward $90, the stock has coughed up a lot of those gains, falling back into the high-$70s. Now floating between the 50-day and 200-day moving averages, Alibaba is trying to find support.
Since early May, the $77 to $78 level — which contains the Q1 high — has been support. If this area can’t hold and the stock drops below $75 to $76, bears could gain momentum.
On the flip side, a move back above $80 could reaccelerate the long trade, shifting momentum back to the bulls.
Options
For some traders, options could be one way to speculate on BABA. Bulls can buy calls or call spreads for an expected rally, while bears can buy puts or put spreads to speculate on more downside.
In either scenario, buyers limit their risk to the price paid for the options or spreads. To learn more about options, consider visiting the eToro Academy.
What Wall Street is watching
GME — GameStop soared over 21% and rallied a further 8% in extended trading amid rumors that Keith Gill holds 5 million shares and 120,000 of the June $20 call options — and supposedly didn’t sell any during Monday’s rally. While shares rallied notably on the day, remember that the stock was up 75% at Monday’s high.
SPOT — The music streaming service rose 5% after announcing an increase in US premium subscription prices set for July, marking Spotify’s second price hike within a year.
INDA — Indian stocks responded to recent election results, with the iShares MSCI India ETF — INDA — paring its gains after hitting a year-long high. The NSE Nifty 50 Index fell sharply by as much as 3.8% in Mumbai, marking the largest intraday decline in over two years. The rupee experienced its steepest drop in 10 months against the dollar, following a rally in the previous session.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.