Alibaba surges over 20% as China pledges support for markets

• Chinese stocks surge as China pledges support for markets

• Alibaba trades over 20% higher today

• Stock is having the best day since 2014

• Reuters says that company is reading a massive jobs cuts

• Stock continues to trade within range of the downward channel

Chinese equities have been under selling pressure this year with major indices from the country dropping over 30% off 2021 closing levels. However, a massive reversal occurred today with major Chinese indices finishing today's trading 3.5-9.0% higher. What happened? Chinese authorities pledged to stabilize domestic markets, resolve risks involving domestic developers and support overseas listing of Chinese stocks. Such a comment was made to the Chinese state media by the country's financial policy committee and Yi Gang, governor of PBoC, said that the central bank will participate in implementation of those policies. In response to those news, strong gains can be spotted on the US-listed Chinese companies, even though Chinese authorities also pledged today to complete a crackdown on Big Tech and majority of US-listed Chinese stocks are tech companies.

Reports that Chinese authorities will engage to end 12-month long weakness of Chinese equities sent shares flying. US-listed shares of Alibaba (BABA.US), Chinese e-commerce giant, are trading 23% higher today! That's the biggest daily jump since 2014. While news of Chinese support are the main drivers of the moves in Chinese stocks today, Alibaba may also be impacted by Reuters report. According to the report, Alibaba Group and Tencent will slash tens of thousands of jobs amid Chinese crackdown on tech companies. Reuters claims that more than 15% of Alibaba's workforce, or 39,000 jobs, could be removed. On one hand, this would result in major cost savings for the company. On the other hand, such a big reduction in workforce would likely be accompanied with scaling down of the business and may therefore be a long-term negative.

Taking a look at Alibaba chart (BABA.US), we can see that while today's price jump is a big one, there are no reasons to celebrate yet. Stock is still trading within the range of a downward channel and there is a long way to go until a technical trend reversal occurs. Stock would need to break above the $115.50 area and an upper limit of the downward channel that lies slightly above. However, even in such a scenario, the trend would still be bearish from a technical point of view. In order to talk about bullish trend reversal, a break above the $138.50 area would be needed. This area is marked with the upper limit of the Overbalance structure and a previous local high og the ongoing downward impulse.

Source: xStation5