Alibaba succumbs to bear pressure. How attractive is the stock now?

Alibaba Group Holdings Ltd. (OTCMKTS:BABAF) fell 18% on Monday after negative China news. Cumulatively, the stock has lost more than half of its value year-to-date. The Monday sell-off affected all the major Chinese tech giants, including Tencent, Baidu, and Meituan.

Investors grew concerned following a political reshuffle by President Xi Jinping. The change allows Xi an unprecedented third term in office. Analysts are now fearing the move could have negative repercussions for private entities. 

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One Xi’s leadership has been blamed for a series of policies that have exerted a grip on China’s tech sector. Xi has also imposed a “zero-Covid” policy which has seen firms in cities such as Shanghai lose billions of dollars.

Secondly, the third term has been seen as a continuation of Xi’s loyalists. In particular, is the Politburo standing committee of the ruling Communist party. Analysts say the appointments by Xi possess limited capacities, which could grow investors’ concerns. Monday’s tech stock reaction underlies the market fears. 

Oversold Alibaba stock needs magic to overcome a drop below $59

Turning to the technical side, Alibaba’s key levels are established at $88 and $59. The stock trades at $59.88, meaning it has already found new support. The $88 has been turned into resistance following a sustained bearish week. 

An RSI reading of 30 signifies that we are now in the oversold zone for BABA. That could allow bulls to try to take the stock higher.

However, with the bear market and sentiment following the latest development, we need to be cautious. A lower price level is possible, or a short-term price appreciation could be followed by a sharp correction.

Should you buy Alibaba stock?

This article finds it unsuitable to buy Alibaba stock now. Aside from the political developments, China continues to face an uncertain regulatory and macro landscape. Covid-19 lockdowns are also a concern. It is advisable to wait until the bear market subsides and the uncertain operating landscape improves.