Alibaba Surges 2.7%—What’s Driving the Rally?

• Alibaba (BABA) spikes 2.7% to $106.64, breaking above its 200-day moving average of $108.76.
• The stock trades within a $2.35 intraday range, hitting a session high of $106.76 and low of $104.41.
• Sector leader Microsoft (MSFT) slips -0.4%, while BABA’s 30-day volume surges 60% from average.
• Recent data shows Chinese investors sold $6B in Alibaba shares in June, contrasting with Wall Street’s bullish $163 price target.

Alibaba’s intraday surge defies broader tech sector softness, fueled by earnings optimism and AI-driven growth. The stock’s technical rebound raises questions about whether this rally can sustain against ongoing local selling pressure.

Earnings Beat and AI Momentum Ignite Alibaba’s Rally
Alibaba’s 2.7% surge stems directly from its fiscal Q4 results, which beat estimates with $32.6B revenue (+7% YoY). AI sales grew triple-digit for the seventh straight quarter, driving cloud revenue up 18% and Taobao/Tmall commerce revenue 12% higher. The company’s net income surged 1,203% to $1.7B, boosted by mark-to-market gains. Analysts now project a $163 price target (+60% upside), highlighting undervaluation despite Chinese investor outflows. This earnings-driven momentum overcomes local selling, signaling a potential shift in sentiment.

Tech Sector Mixed as Microsoft Slumps Amid Regulatory Scrutiny
While BABA rallies, sector leader Microsoft (MSFT) falls -0.4% amid OpenAI board seat removal and antitrust concerns. The tech sector faces mixed headwinds: AI-driven gains contrast with regulatory pressures and geopolitical tensions. Alibaba’s outperformance highlights its unique position as a China-based AI/cloud leader, benefiting from domestic infrastructure demand even as mainland investors retreat. The sector’s divergence underscores the importance of company-specific catalysts over broad trends.

Leveraged ETFs and Bullish Options Positioning for Alibaba’s Next Move
BABA’s technicals show a break above its 200-day MA ($108.76), with Bollinger Bands suggesting a potential rebound after hitting the lower band. Key indicators:
• RSI: 36.5 (oversold, signaling buying opportunities)
• MACD: -3.27 (histogram contraction hints at momentum shifts)
• 30D MA: $114.37 (resistance level for sustained gains)

Aggressive bulls can pair KBAB (KraneShares 2x Long BABA ETF) (+5.5% today) with bullish options:
1. BABA20250718C106 (Call, $106 strike):
- Delta: 0.56 (56% price sensitivity)
- Theta: -0.30 (rapid time decay)
- Gamma: 0.072 (high volatility responsiveness)
- Turnover: 249,683 (high liquidity)
- Why? Its delta/gamma combo offers asymmetric payoff in a breakout above $108.76. At a 5% upside to $112.02, payoff would hit $6.02/share.

2. BABA20250718C107 (Call, $107 strike):
- Delta: 0.49 (49% price sensitivity)
- Theta: -0.28 (moderate decay)
- Gamma: 0.074 (strong volatility leverage)
- Turnover: 808,639 (most active in the chain)
- Why? Its high volume and mid-delta make it ideal for a gradual ascent. At $112, payoff reaches $5.02/share—outperforming flat ETFs.

Trade Hook: If BABA holds above $108.76, KBAB could target $14.50 by week’s end. Short sellers beware—this call spread offers a 53% return potential in a 5% move.

Backtest Alibaba Group Stock Performance
Following the 3% intraday surge in BABA, the stock experienced mixed short-to-medium-term performance. The 3-day win rate was 45.70%, indicating that approximately half of the time, the stock declined slightly, with an average return of -0.07% over the initial 3 days. The 10-day win rate was slightly higher at 44.16%, with a negligible return of -0.04% over that period. However, the 30-day win rate dropped to 41.07%, with a slight decline of -0.79% overall. The maximum return during the backtest was 0.07%, which occurred on day 4, suggesting that while the stock had a brief positive momentum, it largely faded away in the following weeks.

Alibaba’s Bull Run Faces Key Resistance—Here’s What to Watch
Alibaba’s rally faces critical resistance at its 30-day MA ($114.37) and the $112 psychological barrier. Investors must monitor Chinese consumer sentiment and geopolitical risks, as local selling remains a headwind despite strong earnings. With options activity spiking around $106–$108 strikes, traders should watch for a decisive breakout above $110 to confirm sustainability. Meanwhile, Microsoft’s sector leadership slump (-0.4%) underscores the need for Alibaba to prove its AI growth can offset macro uncertainties. Action Alert: Bullish positions in BABA20250718C106/C107 remain viable until $104 support holds—failure risks a retreat to $99.50 lows seen in June.