How An Institution Is Preparing For The Big Alibaba Rebound Play

Alibaba Group Holding Ltd -ADR BABA has been slaughtered since October 2020 when it reached an all-time high of $319.32. The sharp decline has been partly due to poor U.S./China relations as well and Chinese regulators cracking down on the e-commerce giant and its CEO Jack Ma.

Since July 22 the decline in the stock has accelerated and although there has been some bounce plays for the bulls, the stock has become risky due to new out of China, when the U.S. markets are closed, causing Alibaba to gap down on four separate occasions. Gaps fill 90% of the time, however, so it is very likely Alibaba will trade back up to fill its highest gap near the $212 level in the future.

On Friday Alibaba slammed into a support level at the $155.50 level and bounced up slightly from it. The support level was created back in 2019 and could mark the pivot point for Alibaba’s rebound.

After hours, just before trading closed for the weekend an institution(s) purchased a whopping $611.71 million worth of common shares of Alibaba. It is likely the trader chose to purchase common shares as opposed to options to avoid time decay if Alibaba trades sideways or lower before rebounding back up to fil the gaps.

See Also: Is Alibaba Stock About To Rebound?

Why It’s Important: When a block trade occurs it indicates a hedge fund or institution has taken a position in common shares. A block trade always involves large sizing and is typically handled by a blockhouse privately and outside of the open market. Because block trades don’t happen on the open market the large size of the trades doesn’t create volatility in the stock being traded.

These types of purchase orders are made by institutions purchasing a large number of a security and retail investors can find watching for block trades useful because it indicates “smart money” has entered into a position.

The BABA Technologies Trades: Below is a look at the notable alerts, courtesy of Benzinga Pro:

• At 6:24 p.m., a trader executed a block trade above ask of 1.6 million Alibaba shares at $160.98 per piece. The trade represented a $257.56 million bullish bet.
• At 6:28 p.m., a trader executed a block trade above ask of 2.2 million Alibaba shares at $160.98 per piece. The trade represented a $354.15 million bullish bet.

BABA Price Action: Alibaba closed Friday’s session down 1.61% at $157.96.