PreMarket Prep Stock Of The Day: Alibaba Group

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

One strategy discussed on the PreMarket Prep Show is going long a particular issue ahead of a major event. For example, Apple Inc. AAPL has had pre-earnings rallies over the years a few days ahead of an actual report as investors anticipate another blowout quarter.

Many traders will even exit ahead of a quarterly report, eliminating the risk of the actual results.

On Wednesday, Alibaba Group Holdings Inc. BABA will hold Singles Day, a Chinese e-commerce event where billions are spent snapping up items on Alibaba's platform.

With the difference in time zones, the event started at 11 a.m. Tuesday in the U.S. Alibaba's price action ahead of Singles Day makes it the PreMarket Prep Stock of the Day.

Volatile Over The Last Few Weeks: Alibaba made its all-time-high Oct. 27 at $319.32 and posted its all-time-closing high on that day at $317.14. The issue backed off that level, but was submarined on Nov. 3, falling from $310.84 to $285.67, when it was announced that the company's Ant Group IPO had been suspended in China.

It made a few attempts to return to recoup its losses as a result of the cancellation, but was only able to reach $304 early in Monday’s session. Alibaba retreated with the rest of the market to end the session in the red by over $9, falling from $299.95 to $290.53.

Alibaba Caught In Rotation Out Of Tech: As a result of major progress being made on a vaccine for COVID-19 by Pfizer Inc. PFE, there has been a huge sector rotation out of technology stocks and into issues that would benefit from the complete reopening of the economy. 

The rotation started in the premarket in Monday’s session, continued throughout the day and into Tuesday’s premarket session and then spilled over into Tuesday’s regular session.

BABA Price Action During Show: When the issue was being discussed on the show, it was trading at the $283 area and was discussed in the context of going long in anticipation of great Singles Day results. 

The author of this article identified the $280 level as a critical support level to hold. The reason: Alibaba had bottomed in that area two times in the last five sessions.

In the event that level was breached, there were limited daily support levels in the $270 handle that would cushion the decline.

BABA Price Action Off The Open: There was continued selling pressure on the issue into the opening bell. As a result, it opened just under $280, kissed it and then cratered.

As of noon Tuesday, the ensuing decline took Alibaba to $264.33 and it was attempting to rebound as Singles Day results become known.

The current low matches the issue's Sept. 25 low ($264.56) and may be a key level to watch over the next few sessions to determine if the retreat in the issue has come to an end.

Alibaba shares were down 8.21% at $266.68 at last check Tuesday. 

The full discussion on the issue from today’s show can be found here:

Alibaba co-founder Jack Ma. Benzinga file photo by Dustin Blitchok.