BABA (Alibaba) Turned Out to Be The Contrary Play Mike Thought it Could Be

by Mike Paulenoff

February 9, 2025 • 5:35 PM EST

On January 6, 2025, this is what I discussed with MPTrader members about the Chinese equity names--Alibaba (BABA) in particular:

BABA-- For anyone who wants an outlier contrarian play for the first two-quarters of the Trump Agenda, let's consider BABA. Purely from a technical perspective, I can make a compelling technical argument that the 12/20/24 low at 81.5 ended the larger correction off of the Oct 2024 upleg (from 71.80) high at 121.06. To confirm the low, any weakness must hold support at 81.50-83.50, and forthcoming strength must climb to and above key resistance from 91.25 to 92.60, which will trigger an intermediate-term upside reversal signal projected into the 105-108 target zone...

That's the technical setup that economic and geopolitical developments between Trump and Xi must overlay. Do we think the new relationship will be transactional or confrontational? My bias is to think it will be transactional because that is Trump's modus operandi and because the Chinese economy needs the US consumer to demand its manufacturing, technological, and production capabilities.

If that proves to be the case between the lines of tough talk but much less detrimental action by both nations, then BABA's AI, Quantum, and Cloud businesses could prosper mightily (with Xi's blessing) during the Trump Administration... Last is 87.26...

Fast-forward five weeks, three of which since President Trump took office on January 20th, we see that BABA has followed my bullish price path, hitting a multi-month new high at 107.82 last Friday (2/07/25) that represents a 24% upmove from my 1/06/25 Heads-Up about a potential contrarian play during the first half of 2025. The surge in BABA was aided by the unveiling of a supposedly much less expensive Chinese Deepseek AI model, newly released BABA AI models, and investors exhibiting optimism about a new workable Trump-Xi economic relationship.

Although during the advent of "Trump 2.0," at times (putting it mildly), it feels like we are in a bull market of uncertainty, the bullish month-long structure of the upmove in BABA argues in favor of considerably more strength, albeit with some near-term turbulence likely ahead of Earnings on 2/20/25 (before the opening bell).

In other words, the technical setup in BABA (also KEWB and YINN) makes me think that Trump and Xi need their relationship to be accretive to accomplish their respective domestic policy goals.

Join me and MPTrader members for our constant opportunistic technical and fundamental discussions about BABA and many other individual stocks, ETFs, macro indices, sector ETFs, commodities, energy, precious metals, and Bitcoin ASAP to aid in your investment and trading decision-making during tumultuous Trump 2.0... MJP

Mike Paulenoff is the author of MPTrader.com, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking. Sign up for a Free 7-day Trial!

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