Alibaba tumbled as its largest shareholder SoftBank is expected to sell shares

Despite the strong momentum in the Asian market following the Lunar New Year holiday, the share price of China’s most significant tech icon Alibaba Group Holding Ltd (All Sessions) fell by over 6% this week.

The slide was primarily attributed to a note revealed by JPMorgan Chase that SoftBank Technology Corporation, the largest shareholder and well-known supporter of Alibaba, is expected to dispose part of BABA’s shares in the near future.

SoftBank owns 5.39 billion ordinary Alibaba shares or a 24.8% stake. Softbank invested $20 million in Alibaba back in 2000 when it was just a young startup. In fact, SoftBank’s founder and CEO Masayoshi Son was one of the earliest investors and supporters for Alibaba.

However, due to the Chinese government’s recent technology clampdown, Masayoshi Son has faced increasing pressure from investors as the value of major portfolio companies, including DiDi Global Inc., was dragged to the floor.

Last year, Alibaba was down nearly 65% while DiDi dropped over 50% during its five-month-only US-listed journey. To make matters even worse, the long-awaited sale of chip designer Arm Ltd. to Nvidia Corp looks set to fail soon. Because of the above, the sale of beleaguered Alibaba’s shares seems like a very likely move considering the current position for SoftBank.

Technical Analysis

The potential stake sale by SoftBank, coupled with the expectation of slowing down growth, which will soon be verified in the upcoming quarterly report, will continue to weigh on the sentiment toward Alibaba’s shares for the foreseeable future. The stock is down 20.37% from the past three weeks and 64.58% from its October 2020 highs.

A triangle shape with a clear descending trendline since November can be found from the daily chart, although the price had attempted to break through during the January rebound. In conjunction with 20 and 50 days MA, the upper trend line will be the critical pressure level for the BABA’s price to eye on this week, which is sitting between $123 to $124.

The bottom side of the right-angle triangle, around $110, performed as the most crucial support for BABA’s price since early December, is expected to face another test as the RSI shows the rising selling pressure. Once this support level has been broken through, investors for the BABA will need to look further back to April 2017 to find the support at around $105.

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