馃懟 ALIBABA: DERIVATIVES TRADING 馃懟
Alibaba Group Holding Limited [NYSE: BABA], through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses to engage with their users and customers in the People's Republic of China and internationally. The company operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others. It belongs to Consumer Cyclical sector and Internet Retail industry. Some insights are:
Pros:
- Nice technical structure that shows a inverted S-H-S figure
- The negative and fear propaganda dilutes the interest of retail investors
- China is one of the world largest economies. It does not make sense to think that BABA will not return to at least its average (the odds are in its favor https://jjplindex.blogspot.com/2023/07/sp500-probabilities-of-appreciation.html )
Cons:
- Geopolitical tensions and problems with Chinese government that may interfere with its valuations
- Possibility of NYSE delisted in 2024
- Slowdown of the current and future Chinese economy in the face of possible economic blockades
The current EPS [5/06/23 TTM] is ± $4.02 USD and a possible PER spread could be:
- PER 20: ± $ 81 USD
- PER 35: ± $ 142 USD
Levels:
The next support zone is at ± $80 USD and the great support is at ± $58 USD. The next resistances zones are ± $124 USD, ± $161 USD and ± $211 USD. The ± $120 > $158 USD zone is an indifference price, an optimal suggested target could be ± $185 USD and all above ± $261 USD could be highly speculative.
Hedge example:
- Call [sell]]: $230 USD
- Cal [buy]: $170 USD
- Put [sell]: $70 USD
- Put [sell]: $60 USD
Risks:
A minor risk is that the price does not exceed $170 USD, but could be compensated with the profit of the Call at $230 USD. The worst risk is the price exceeds $230 USD or that the price will fall severely below $60 USD for much time; for any case, a close position is required. For the case where the stock falls below $70 USD, the investor will need to start an accumulation phase. For the case that the stock exceeds $230 USD, the $300 USD is their last big resistance to short.
The best analysis is yours!
J. Joel Padilla
Copyright: Joel Padilla 2023
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