Shorting Alibaba Stocks Again, As the Decline Doesn’t Seem to End
Alibaba is one of the largest and most widely recognized Chinese tech companies around the world. It owns China’s largest e-commerce marketplaces and its shares used to be on a bullish trend for many years, picking up incredible pace in Q3 of 2020, as the price increased to $320 per share. Although, we saw a reversal in November last year and Alibaba stocks have been declining since then.
Moving averages used to work as support for BABA stocks in the previous year, but this year the price has broken below all moving averages and the 20 SMA (gray) has turned into resistance on the weekly chart. We have sold this stock before during retraces higher and decided to take another shot today opening a sell BABA signal.
Baba stocks heading for $100
What’s Driving Alibaba Stocks Lower?
It’s clear that the Chinese government has put Alibaba on the list of dissident companies and it is fighting it. Alibaba faces tougher regulatory headwinds as a result and reported an 81% decline in profits, amid the tech clampdown in China.
Last month China’s State Administration for Market Regulation fined a number of companies for not properly disclosing acquisitions, which came after ongoing pressure from the Chinese government. The campaign has erased more than $1 trillion from the market value of Chinese companies worldwide. These companies were becoming too big for the government to control and they could affect the country’s politics. Besides that, Alibaba’s Cloud and Alipay which was getting further into cryptocurrencies was another factor why the Chinese government wanted to clam down on Alibaba, as it is doing so on every company, crypto or not.
Although this might not be about killing the private sector for the Chinese Communist Party it’s about taming the excesses of capitalism and embracing the country’s history of socialism. The Chinese economy hasn’t been doing that great in 2021 because of this and this is weighing further on Chinese companies’ stocks.
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