Alibaba yesterday listed it’s 500 million new stocks to Hong Kong raising almost 11.3 billion from the secondary listing that boosted stock investors confidence on the stock as it closed yesterday in NYSE at $194.66. Its secondary offering price was 176 HK dollars. BABA’s offering was the biggest listing in Hong Kong’s since 2010. Each of the ADS that trades in NYSE is the equivalent of eight Hong Kong shares.
Alibaba proceeded to stock offering despite it sitting on a huge cash pile of more than $30 billion but is capitalizing on the momentum from recent strong performance and earnings, including the “Singles Day” sales of $38.4 billion it reported in on Nov. 11, a 26% increase from the previous year. The proceeds from the share sale will be used to promote strategies to expand its active users, help businesses with cloud and digital transformation, and continue to innovate and invest for the long term.
Alibaba felt the heat from the trade tensions between US and China as the stock price after the trade tariffs in March 2018 dropped from $200 down to $130 in early 2019 just to start a recovery helped by the rally in equities across the globe and strong earnings performance.
I expect Alibaba to be one of the biggest beneficiaries of a trade deal both in revenues and earnings that will justify a strong performance for the stock price.
BABA Technical Outlook
Baba stock is 44.3% higher for the year, while today the stock is adding 1.67% at $198 making fresh yearly highs. The bullish momentum which started in October is still intact and now immediate resistance stands at $199 the daily top, before a move up to June 21st 2018 high at $206.
On the downside, first resistance for BABA stands at $197 the daily low, while the next barrier to the downside is the low from yesterday at $188; in the case of a break below it will accelerate the selling pressures as many investors who bought the stock at the secondary offering might start selling Baba with negative implications that might push the price down to next support at $177.38 the 50-day moving average.