The China Effect: Alibaba Group, Dangdang, Sohu.com

Alibaba Group Holding Ltd (NYSE:BABA), E Commerce China Dangdang Inc (ADR) (NYSE:DANG), and Sohu.com Inc (NASDAQ:SOHU) are trading sharply lower

Digital Content Group
Jun 26, 2015 at 12:00 PM
facebook X logo linkedin


China's Shanghai Composite had its biggest one-day percentage drop in five months today -- sending the index near the brink of a bear market, and mainland-based U.S.-listed stocks into the red. Three notable names feeling the heat of China's steep sell-off are e-commerce concerns Alibaba Group Holding Ltd (NYSE:BABA) and E Commerce China Dangdang Inc (ADR) (NYSE:DANG), as well as gaming guru Sohu.com Inc (NASDAQ:SOHU)

BABA is off 2.1% today to trade at $83.50. In addition to the broader bearish bias for China-based stocks, news that rival JD.com Inc (ADR) (NASDAQ:JD) is teaming up with ZestFinance to launch a credit-scoring service -- possibly creating competition for one of BABA's newest ventures -- may also be weighing on the shares. Regardless, today's negative price action is nothing new for the stock. Year-to-date, in fact, BABA has surrendered 20%.

Amid this decline -- and while BABA has been busy with a number of new undertakings -- optimism among options traders has been on the rise. In fact, since the start of June, Alibaba Group Holding Ltd's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio has risen to 4.36 from 3.40. Should the shares continue to struggle, a capitulation from some option bulls could translate into headwinds for BABA.

DANG has dropped 9% to $9.26 -- and is testing a foothold atop its 80-day moving average. After hitting its most recent low of $8.06 on June 2, the stock tried to stage a rebound, but was quickly contained by its 320-day moving average. Longer term, DANG is down 28% year-over-year.

On the sentiment front, skepticism is steep toward E Commerce China Dangdang Inc. Of the seven analysts covering the shares, six maintain a "hold" or "strong sell" suggestion. Meanwhile, short interest surged 36.4% in the latest reporting period to 3.6 million shorted shares. However, this pales in comparison to the record high 9.77 million shares that were sold short in December 2013. The stock could encounter a fresh wave of selling pressure, should short sellers continue to pile on.

SOHU, meanwhile, is off 5.4% at $60.92. Unlike BABA and DANG, SOHU has put in a strong technical performance in 2015. In fact, ahead of today's drop, the security was boasting a more than 21% year-to-date lead, and hit an annual high of $71.78 just two weeks ago.

Option traders, meanwhile, have shown a distinct preference for long calls over puts in recent weeks, per SOHU's 10-day ISE/CBOE/PHLX call/put volume ratio of 136.97 -- in the 98th annual percentile. Echoing this call-skewed backdrop is Sohu.com Inc's Schaeffer's put/call open interest ratio (SOIR) of 0.24, which rests lower than 76% of all similar readings taken in the past year. Simply stated, short-term speculators are more call-heavy than usual toward SOHU.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI