Alibaba (BABA) holding above 80 ahead of Q4 earnings release

The fundamental backdrop has been challenging for China’s tech sector in general, whilst lockdowns in China and supply chain bottlenecks which simply have not recovered from the pandemic produced tough trading conditions for the ecommerce giant. As for performance, the stock has fallen just over -77% between October and March. Assuming it closes lower this month (which is looking likely), it’s on track to close lower for 13 months over the past 19.

It is therefore safe to say it is within in an established downtrend. But do investors want to be short at such low levels? Apparently not, with short interest just shy of 1.5%. But there could be plenty of money sat on the side lines waiting to scoop up a bargain at the first sign of a turnaround, the closer it gets to its record low. Also take note of the record high volume candle in March which coincided with a Doji. The fact it was able to recoup earlier losses in the month suggests a ‘change in hands’ may already be underway.

Alibaba earnings released before US market open today

Alibaba will report Q4 fiscal earnings before US markets open today. Quarterly revenue is expected to rise 6.3% (CNY 199.256 billion) and earnings are forecast for CNY 7.39 per share, down from 10.32 in the same quarter last year. Of the analysts polled, 39 have a ‘strong buy’, 6 have a ‘hold and 2 ’sell’. If earnings can surprise to the upside perhaps it can help the stock rally from support, although at the time of writing the Hong Kong listed stock (9988) is down around -2.5%.

Ultimately, unless we see more stimulus from Beijing coupled with support specifically for the tech sector, it may take some time for the tide to turn for bullish investors. But with the stock holding above March’s low and also above 80, we see the potential for a rise over the near-term.

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