Alibaba Stock News: BABA shares advance 5% on reduced China covid restrictions

• Alibaba stock is rebounding on Chinese authorities announcing imminent reopening.
• BABA stock has performed badly all year to frequent covid lockdowns.
• National Health Commission says lockdowns must end soon.
• The Hang Seng Index jumped 5.2% on reopening excitement.

Alibaba (BABA) stock has jumped more than 5.2% in Tuesday’s premarket to $80 after China's National Health Commission said covid-related lockdowns should end as soon as possible. This announcement sent nearly all Chinese stocks higher as renewed covid lockdowns had pushed these same stocks into a slump over the past several weeks. Protests across China starting last week and seeming to die down on Monday had also weighed on sentiment, but now it appears that the Chinese Communist Party is listening to protestors concerns. If lockdowns do indeed end, then the reopening trade should ignite even further.

Alibaba stock news: Ending lockdowns could lead to broad China rally

Besides simply saying that lockdowns would soon end, Chinese authorities listed other policies that may help the effort. One policy would focus on raising the level of vaccination rates among the nation's elderly. Right now this cohort is vaccinated at about 60%, which is much lower than the overall population at 90%. It would seem that Chinese authorities are learning from the public's criticism regarding heavy-handed covid restrictions and see it as best for the Party and national stability that everyone goes back to work. Chinese GDP projections have been lowered in the back half of the year due to these restrictions.

Now Alibaba might have a window of hope to regain its footing after bulls have largely lost interest in a stock that has been greatly hurt by government policies and regulators. The Hang Seng Index rallied 5.2% early Tuesday. Wall Street's consensus price target is $137, 71% higher than even the premarket's elevated price, but BABA stock will require a sustained change in government policy to build back its share price.

Of course, the government has talked about reopening before but always returns to its prior policy after covid cases begin to spike. This time it could be different, however, since China rarely features protests that last for multiple days. These protests were enough to scare Wall Street on Monday as trading houses worried how Chinese production would affect US corporations. Tesla (TSLA) and Apple (AAPL) were stocks in the crosshairs due to their extensive production in China.

Other Chinese stocks like JD.com (JD) and Pinduoduo (PDD), major competitors to Alibaba, are also getting in on the fun. JD.com has advanced 6.6% early Tuesday, while Pinduoduo adds 5.4% on top of its Monday earnings surge. Truist Securities and Benchmark both reaffirmed their Buy ratings on Alibaba stock following earnings on November 17 but cut their price targets to $120 and $180, respectively.

Alibaba stock forecast

Alibaba stock has been selling off following its recent earnings report, but the reopening narrative should allow bulls to once again challenge the $85.70 resistance level. This was tested on both October 5 and November 17. Breaking through that level would then allow the market to retest August's supply zone stretching between $103 and $105. 

Both the Moving Average Convergence Divergence (MACD) indicator and the the 9-day/21-day moving averages are providing bullish readings, so this bodes well for BABA stock. Support remains at $73.28 and $63.40.

BABA 1-day stock chart

The author owns shares of BABA.