PreMarket Prep Stock Of The Day: Alibaba

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.

Stocks get hot and then they're not. One that was super-hot for a few years and then was not is Alibaba Group Holding Ltd. BABA.

22-Month Run: After ending 2018 at $137.07, Alibaba had a major rally that was really only interrupted during the March 2020 meltdown. The rally off the March 2020 low ($169.05) continued until October when it finally peaked at $319.22.

Fall From Grace: Three different events contributed to the rout in the share price of Alibaba.

• On Nov. 3, the suspension of the Ant Group IPO added some momentum to the downside as the issue had backed off its all-time high falling from $310.84 to $285.57.
• On Nov. 10, the issue was punished when the Street decided to “sell the news” on the sales results from Singles Day, declining from $290.53 to $266.54.
• The knockout blow was delivered on Dec. 24, when Chinese regulators decided to crackdown on the company's business practices. That event instigated the biggest decline of the three events, falling from $256.18 to $222.
• Trading Range: While working on a resolution to the problems the Chinese government had with the company, the issue attempted to rally on several different occasions. After falling miserably when it reached $274.29 in February, the stage was set for a trading range.

Since March, the issue has been in a trading range from $204.39 to $245.69. It should be noted monthly highs had come considerably in May ($236.17 vs. $245.69 in April) and so far this month ($223.17 vs. $236.17).

As of Wednesday, the low of the move was made in May ($204.39) and on a positive note has made a higher low so far this month ($208.23).

Reason To Rally: Before the open, it was announced that Jack Ma’s Ant Group is in talks with the Chinese government to create a credit-scoring company that will put the fintech giant’s own consumer data under the regulatory watch of the Chinese government.

Since the scrutiny of the Chinese government has been the biggest overhang on the issue since December, the news of potential cooperation between the government and Alibaba was welcome news to the bulls of the issue.

PreMarket Prep Take: When the issue was being discussed on the show, it was trading at the $213 area. Dennis Dick, who sold half his stake in the issue when it came under pressure from the Chinese government, asked the question, "Should I rebuy my Alibaba? I just may now, because I have a level, to lean on -- the low of the move at $204.39."

Price Action: After a higher open, it had a brief retreat but found support ahead of the top of Tuesday’s range ($211.66), only reaching $213.13, and continued its move higher.

As of 1 p.m. EST, the rally stalled at $216.33 and has fallen back into the lower $214 handle.