Alibaba’s stock (NYSE: BABA), fell by 7.1% to $196 in the last five trading days after China’s tech sector regulator ordered the country’s internet giants to fix certain anticompetitive practices and data security threats. The company is expected to report its Q1 FY 2022 earnings on Tuesday, August 03. In comparison, the broader S&P500 rose by 1% over the last five trading days. Now, will the company continue the downward trajectory over the coming weeks, or is a rise in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price using multiple years of historical stock data, returns for BABA’s stock average around 3% in the next one-month (twenty-one trading days) period after experiencing a 7.1% decline in a week (five trading days). But how would these numbers change if you are interested in holding BABA stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Alibaba stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
MACHINE LEARNING ENGINE – try it yourself:
IF BABA stock moved by -5% over 5 trading days, THEN over the next 21 trading days, BABA stock moves an average of 2.6% with a 58.3% probability of a positive return over this period.
Some Fun Scenarios, FAQs & Making Sense of Alibaba Stock Movements
Question 1: Is the average return for Alibaba stock higher after a drop?
Case 1: Alibaba stock drops by -5% or more in a week
Case 2: Alibaba stock rises by 5% or more in a week
Is the average return for Alibaba stock higher over the subsequent month after Case 1 or Case 2?
BABA stock fares better after Case 1, with an average return of 2.6% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.3% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how Alibaba stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold Alibaba stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For BABA stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
You can try the engine to see what this table looks like for Alibaba after a larger loss over the last week, month, or quarter.
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
BABA’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for Alibaba stock by changing the inputs in the charts above.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market since 2016.