BABA struggling, but can't bet against the PBOC.
Lately, BABA has traded as a proxy for A Shares w/ 0.83 correlation over the past 60 trading days. So the macro story for BABA is just the macro story for China, and the macro story for China is easy! Three numbers: $800bn, 4.25%, $3.73tr.
$800bn, as in the CSFC's estimated credit line for propping up the Chinese stock market as a margin lending lender backstop.
4.25%, as in the current PBOC lending benchmark rate, plenty of room for rate cuts.
$3.73tr, as in China's current foreign currency reserves.
China is AWASH and I mean AWASH in liquidity. The entire legitimacy of the central party rests on a sustained rebound in A Shares. Over the short and medium term, you'd be crazy NOT to have some exposure to A Shares. Longer-term, the degree of US dollar strength will dictate the sustainability of Chinese manipulation. That said, while the music is playing, you have to keep dancing...
Short term techincals for BABA are bullish. On Monday, we saw shares form a "hanging man candle" right above all-time lows set during July. Since then, we've had confirmation of the reversal in the form of two strong up days - including this morning's gap up on the open. Moreover, we have momentum that looks destined to fill mid-August's gap down. This gap-fill level also corresponds with trendline resistance at 82.70ish. Watch price action at this level for guidance on the ensuing trend's direction. A break out through the downtrend resistance, makes an easy case for the fib extension at 87.83.
$800bn, as in the CSFC's estimated credit line for propping up the Chinese stock market as a margin lending lender backstop.
4.25%, as in the current PBOC lending benchmark rate, plenty of room for rate cuts.
$3.73tr, as in China's current foreign currency reserves.
China is AWASH and I mean AWASH in liquidity. The entire legitimacy of the central party rests on a sustained rebound in A Shares. Over the short and medium term, you'd be crazy NOT to have some exposure to A Shares. Longer-term, the degree of US dollar strength will dictate the sustainability of Chinese manipulation. That said, while the music is playing, you have to keep dancing...
Short term techincals for BABA are bullish. On Monday, we saw shares form a "hanging man candle" right above all-time lows set during July. Since then, we've had confirmation of the reversal in the form of two strong up days - including this morning's gap up on the open. Moreover, we have momentum that looks destined to fill mid-August's gap down. This gap-fill level also corresponds with trendline resistance at 82.70ish. Watch price action at this level for guidance on the ensuing trend's direction. A break out through the downtrend resistance, makes an easy case for the fib extension at 87.83.