BABA Stock Up 15% and 4% Premarket – Time To Climb Aboard The Recovery?

Alibaba (NYSE: BABA) stock was up 15% yesterday and another 4% premarket this morning. Is this the time to climb aboard the BABA recovery train? There's a certain argument that perhaps this is in fact although, as ever, we need to be careful. For the major determinant of the Alibaba stock price is Chinese government policy. That's what's driving this rally, that's also what caused the falls from $300 a couple of years back. Chinese government will be the leading determinant of the BABA price off into the future too.

Yes, of course the performance of the underlying business matters at Alibaba as with anything else. But that is influenced by policy, as is the structure of what BABA may do on other grounds. That float of Ant Financial wasn't allowed for example, moves into this or that business sector are controlled by policy, not by corporate desire. And there's always the thought that someone might want to take Jack Ma down a peg or two within that ruling apparatus.

It's exactly these sorts of thoughts that led to the 15% rise in Alibaba stock yesterday and which are driving that 4% again rise so far today. Chinese government policy seems to have changed, so there's more interest in this specific company.

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as to what has actually changed it's not even policy concerning Alibaba as yet. What has happened though is that China cut off the supply of licences for people who wished to make video games. The concern within the power structure was that kids were playing them too much or too long. So, curb the sector – to the point that games manufacturers are at least supposed to log – and limit – playing time.

This past week has seen two rounds of new licences being given out. So, perhaps the curbs on the games sector are being lifted – that's enough to produce a jump in BABA stock. Not so much because of Alibaba's direct exposure to the games market itself, but as an indication of how the whole tech sector is likely to be regulated in the near future.

There were also significant movements in JD.com (NASDAQ: JD) up 8% ad Pinduoduo (NASDAQ: PDD) up 10%.

It's worth emphasising that this isn't, particularly, a reduction of any limitations upon what Alibaba may do. Rather, it's taken to be indicative of the general attitude towards regulation and controls on the sector as a whole. That means that sentiment could recede, along with the stock price. It's also possible that it could continue to advance on that wave of enthusiasm.

It's likely that the next grand price move could be when there's news which specifically and exactly affects BABA. A loosening of restrictions upon their own direct activities say. For the general analysis is that Alibaba's good at what it does, it's a dominant force in the Chinese internet economy. The restrictions upon its growth have been those imposed by the government. If those restrictions are being loosened than that could be very bullish for BABA stock. One the other hand, of course, that does require that the actual restrictions holding back this specific company are reduced – beliefs on that are what will determine training positions.