Where Can Alibaba Stock Go Now?

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We’ve all heard of the e-commerce giant Alibaba (BABA) by now. But where can Alibaba stock go from here? $150 by May 2022. Yes, that would be a nearly 100% gain from its recent lows for the stock. But as I said last week, the Chinese government and its central bank called the bottom for the nation’s tech sector. So did you believe China when they said it would provide monetary support for its economy?

Two Scenarios for Alibaba Stock

I’ve been on the record now saying that by May, the stock would rally to $150 within two months or plunge back to $80. In the first scenario, I explained (just last week) that it would be smarter for investors to simply use long-call options and speculate on higher prices for the stock. 

The reason is due to the second scenario. If hope fades that China will work with U.S. regulators to address accounting practices – and delisting starts to fill investors’ minds – this could crash again. You simply want to leverage call options to define your risk and maximize your return. 

Remember that Alibaba stock is still trading under levels where deep value investor Charlie Munger started buying the stock. Remember that capitulation kicked in for Alibaba investors after it fell under $90. Finally, remember that we’re only in the early innings of China’s support for its economy and its efforts to attract investor capital. 

And keep in mind that market momentum turned Green last week, and speculative capital (and leverage) have returned to the market – particularly on the institutional side. A rebound appears likely to continue. But define your risk/reward with call options.

I’ll break down the value of simple calls versus spreads and show you a few tools that will help you better determine the ideal trade for you. And if Alibaba is too rich for your blood at $115 per share, you can speculate on JD.com (JD) under $65 for a return to $72 or even Didi Global (DIDI) under $4 for a return to $6.50.

Check THIS Out

Many people unwind on Hump Day (Wednesday) with a drink in hand. I’m on the road at Baltimore-Washington International Airport… at the bar… drinking club soda… eating tacos… and looking at THIS CHART.

This is the list of the largest insider purchases by CFOs and CEOs over the last ten days. One name REALLY jumps out. DocuSign (DOCU). That’s a common name that has popped up in the world of ARKK Invest chief Cathie Wood over the last year. Wood had been buying and selling the stock. She’d jumped in, speculated, and swore that it was a revolutionary technology. 

There was just one problem. While Wood was buying up the stock at lower and lower prices, not even the executives at the company were willing to purchase the stock. Here’s evidence…

The red lines are insider selling over the last few years. The blue lines? Those are purchases by executives. Insiders have sold more than $835 million in stock in the last five years. And now… finally…  the CEO is buying the stock in 2022. 

The stock has a 52-week high of $314.76. It recently bottomed out at $71. That’s a 77.4% drop in a year. The CEO called a bottom at $74.76 per share on March 15, just as speculation built that the market would find a similar bottom. Instead, with momentum returning to the market, shares are moving higher. 

Always Check Insider Trading

Once again, YOU MUST look at the insider buying and selling habits. Insiders do exploit mispricing in the market. With DOCU now trading at $100 per share, this CEO made a significant gain. And with it… the trade may be over for some time. 

I’ll talk more about that list tomorrow. I’m pretty interested in the insider purchasing at Shift4 Payments (FOUR) and the bounce back for a beaten-down financial technology sector. There’s still a lot of potential for that sector moving forward. And we can take advantage of it.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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