Alibaba Stock Forecast: BABA confirms rally is on with 14.7% spike
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- BABA shares exploded 14.7% on Wednesday to close at $119.62.
- Chinese regulators approved the newest video game titles since July 2021.
- Most Chinese tech ADRs rallied on the news, viewing it as a sign of reduced scrutiny.
Alibaba (BABA) stock had its biggest day on Wednesday since March 16. News that Chinese regulators had green-lighted 60 new online games all at once sent the entire Chinese tech sector off to the races. Having been beaten down for the better part of 18 months, BABA shares played catch-up. BABA closed at $119.62 after trading as high as $121.06 in the session. BABA stock has lost 1.7% in Thursday's premarket to trade at $117.63 on news that China's top regulator is refuting reporting from both Reuters and Bloomberg that authorities have been mulling a revival of Ant Group's IPO. Alibaba owns a major stake in Ant Group.
Pardon me while I brush my shoulders off. Just Tuesday, when Alibaba stock was trading near $104, I wrote: "Above here is further resistance at $119.60. Both levels will supply likely take profit points for bullish traders." As the King James Bible says, "And it came to pass."
Alibaba Stock News: Apparently video game approval is a big deal
What launched Alibaba stock into the stratosphere was a government regulatory change that barely affects its business. China's National Press & Publication Administration approved 60 online games on Tuesday night, the largest approval of games in nearly a year. The last major approval came in July 2021.
The Chinese tech sector, however, took the announcement as more evidence that Beijing's tech crackdown that began in November 2020 is now ending. Just earlier this week the government ended its data security investigation of Didi Global (DIDI) and two other companies.
Since beginning with the shelving of Ant Group's IPO at the end of 2020, billions of dollars in market cap value have been wiped out of the Chinese tech sector. The Ant Group issue began due to regulators' unhappiness with Alibaba founder Jack Ma's critical comments but quickly morphed into a sector-wide review of monopolistic practices and consumer data collection practices.
In April, Chinese authorities announced a change of stance and said they were even willing to provide support to the homegrown tech industry including economic stimulus measures. These attitudes have changed as covid lockdowns in China dealt a severe broadside to industrial output. Now that lockdowns have ceased, China reported a 16.9% growth in exports YoY in May. The government appears set on fighting forecasts of a coming global recession, and China's central bank recently reduced interest rates in stark contrast to nearly all developed economies.
Alibaba Stock Forecast: Consolidation to be followed by run at $128
Now that BABA stock has resoundingly broken out of the three-month, iron grip of a symmetrical wedge structure, expect further upside. At the moment, BABA has already dashed through resistance at $110 and greeted resistance at $119.60. The most likely outcome is consolidation between $110 and $119.60 before bulls make another move higher. This is especially likely since Chinese ADRs are now being talked about more commonly by institutional investors who have already crowded into oil stocks and are looking for alpha elsewhere.
$110 will likely now provide support for the time being. Bulls will attempt a try later this month at the resistance zone that surrounds $128. This area was hard to penetrate in late March and early April. Above there, the year-to-date high on January 12 of $138.63 serves as the final boss before Alibaba can resolutely put the last 18 months of poor sentiment behind it.
BABA daily chart
