PreMarket Prep Stock Of The Day: Alibaba

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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.

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The pain trade in Chinese companies listed on U.S. stock exchanges continues in Monday’s session. Interestingly, the issue that it all began with, Alibaba Group Holding Ltd. BABA, is one of the leaders on the downside.

The Beginning: As Alibaba was retreating from its all-time high made in October ($319.32) and trading at the $250 area, Chinese regulators come down hard on the company.

The closing price on the day prior to the announcement ($256.18) has turned out to be an excellent exit point if an investor was so inclined to eliminate the issue from their holdings.

In fact, the issue did rebound from its initial plunge to $211.23, which was on the day (Dec. 24) following the surprise announcement. While the actual high of the initial bounce was $274.26, it traded actively over $260 in several sessions in late January and into early February.

See also: How To Buy Alibaba Stock

Crisis Over? Over the weekend of April 9, China fined Jack Ma's Alibaba a record $2.8 billion after a monopoly probe found that the company had abused its dominant market position,

Also, the regulator ordered the company to make “thorough rectifications” to strengthen internal compliance and to protect consumer rights. The actions taken were the result of anti-competitive practices in its online retail market.

In the following session, the issue leaped from $223.31 to $244.01. However, after putting in place a triple top at the area over the few days, it has been under constant selling pressure,

Increased Scrutiny On Education Firms: With all of the online Chinese education stocks TAL Education Group TAL, New Oriental Educ & Tech Group EDU and Ganotu Techedu GOTU in the gutter, the Chinese government decided to crack down on the companies business practices, The steep declines in these and other related issues was first reflected in Friday’s session.

With respect to Alibaba, it swooned from $214.04 to $206.53 to end the week.

See Also: Chinese Education Stocks Are Plunging Again: What You Need To Know

Stepping Up The Regulation: Over the weekend, China's Ministry of Industry and Information Technology directed the domestic internet giants to fix certain anticompetitive practices and data security threats, among other directives.

Another Leg Down: Following a much lower open ($198.37 vs. $206.53), it made a feeble attempt to rally, reaching $198.58, before sellers engulfed the issue. Not only has Alibaba made a new low for the move ($190.88), as of 3 p.m. EST, it has done so by a wide margin as the prior low was $198.26. The issue is now flirting with trading under $190 for the first time since last May. Also, the issue will post its first close under $200 since May 28, 2020.

Moving Forward: For those investors who were confident Alibaba had already withstood the wrath of the Chinese government, think again. Based on the daily charts, there is no cluster of multiple lows until the $185.04-$185.69 area from April 1-3, 2020.

On the upside, in the past, Alibaba has rebounded from major declines and filled in the void in price left in the wake. At this time, there are multiple gaps in the issue that may or may not ever be filled.

For starters, there are voids in price from Monday’s session ($198.58 to $203.56) and Friday’s session ($206.89 to $212.60). Unless the Chinese government is satisfied with the measures taken by Alibaba and other related companies, this may not be happening anytime soon.