Alibaba is China's #1 online retailer; offering discounts through collaborations with more than 160 brands. Today, the company announced that it has entered into yet another deal that gives it rights to even more brands. So below, we'll talk about that deal and what it means for the online retail giant. We'll also talk about how the market reacted, what we can expect to see moving forward, and how binary options traders can profit from the trends. So, let's get right to it…
The New Deal That Broadens Alibaba's Horizons
Alibaba announced early Friday morning that it had entered into an exclusive deal with more than 20 different apparel brands. The brands include big names like Zara and Timberland. Under the new agreement, Alibaba will have exclusive rights with regard to the sale of products from these brands online. Therefore, Tmall.com, Alibaba's online market place will officially be the only online sales platform in China where consumers will find these brands. In their statement, Alibaba mentioned that not only will this deal help in terms of sales, but it will also help to strengthen the relationship it has with the more than 160 brands that are not included in today's announcement.
How The Market Reacted To The Deal
In early trading this morning, we did see an increase in the value of Alibaba's stock; which climbed from yesterday's close at $78.96 to today's high of $80 even. However, after the short term spike, we started to see declines in the value of the stock that eventually brought it into the red for the day. Alibaba closed the day off at $78.78 after losing $0.18 per share or 0.23% in the trading session.
What We Can Expect To See Moving Forward
In most cases, when good news comes out about any publicly traded company, we can expect to see gains; as we did early in trading today. However, in the case of Alibaba, I'm not sure that this is going to be enough to pick the company's stock up from the bottom. The reality is that since just months after the IPO, Alibaba has been on a spiraling downtrend for several reasons…
Fake Reviews – One of the first factors that started Alibaba's bearish activity in 2014 was fake reviews. Essentially, manufacturers were paying people to purchase products and leave a positive review; ultimately leading to more sales.
Counterfeit Products – Counterfeit products are a thorn in the side to any online retailer. Ebay, Amazon, and several others have led the fight in the battle against such activity. So, it's no surprise that Alibaba would face the same issues. Unfortunately, the phenomena proved to be incredibly damning to Alibaba's stock price.
Chinese Market Crash – Most recently, Chinese stocks have been feeling major pain as the market in China has crashed; widening concerns over China's struggling economy.
With all of the above creating issues for the company, I just don't see the news of the deal today being enough to cause a reversal in the stock.
How Binary Options Traders Can Take Advantage Of The Trends
Because we are predicting that Alibaba is likely to continue falling in value, put options are likely to be the most profitable moving forward. Therefore, traders should look for short term spikes that increase the value of the stock; ultimately reaching resistance. At resistance, it's time to purchase put options to ride the wave down and profit on the way.
What Do You Think?
Where do you think Alibaba is headed and why? Let us know in the comments below!