Two stocks to watch this week: BABA and HD

Alibaba Group Holding Limited

Shares in Alibaba Group Holding Limited (BABA) incurred losses in the second quarter of around 7%. The company’s earnings report for the fiscal quarter, ending June 2023, is set to be released on Tuesday, 10 August, before the market opens. The consensus EPS is $1.50 (USD) compared to the same quarter of last year at $1.40.

As of 31 March 2023, the company is reporting a current assets/current liabilities ratio of more than 180%. This shows the ability to repay short-term liabilities with the current assets in hand, while the total assets outweigh the total liabilities at a ratio of more than 2:1, proving the financial strength of the company, at least in the short term.

On the technical side, the price was on the move to recoup recent losses, but faced resistance on the upper Bollinger bands, and is currently correcting to the downside. The 50-day moving average was about to cross the 100-day moving average confirming the bullish trend, but the recent correction in the market has broke that and also pushed the Stochastic oscillator back to “neutral” levels.

If the price manages to make a valid break below the 38.2% of the Fibonacci level (around $94), then the next area of strong technical support could possibly be found around the $88 price area, which consists of the 50 and 100 moving averages, as well as the 23.6% of the weekly Fibonacci retracement level.

Home Depot, Inc.

Home Depot, Inc. (HD) share price has made some profits in the second quarter by just over 10%. The company’s earnings report for the fiscal quarter, ending July 2023, is set to be released on Tuesday, 15 August, before the market opens. The consensus EPS is $4.46 compared to the same quarter of last year at $5.05.

The company is currently performing exceptionally well compared to the start of the quarter, but there are some financial issues to pay attention to. Even though the home improvement giant has a current assets/current liabilities ratio of 127%, the debt to equity ratio as of 30 April 2023 is at 113%, indicating that the company is operating at a great level of debt which is something that might discourage investors.

From a technical analysis perspective, the price has been trading in an aggressive bullish rally for the last 2 months with some signs of possible correction in the near short term. The first indication is the extreme overbought Stochastic oscillator, which is holding for more than 3 weeks. The second indication is that in the recent sessions, the price moved away from the Bollinger bands after consecutive touches of the upper band, which usually, but not always, suggests a correction will follow.

If this scenario is confirmed in the following days or weeks, we might see some support around the $320 price area, which consists of a reaction area since mid-February,  as well as the psychological support of the round number. On the other hand, if the bulls prove to be stronger than the bears then we might see the price retesting the previous highs around the $340 level.

This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.

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Author:

Antreas Themistokleous

Antreas Themistokleous is a trading specialist in Exness. He is a Certified Financial Technician since 2018. As a member of the Society of Technical Analysts, Antreas is implementing advanced use of indicators and patterns to conclude in an action plan for different trading strategies.