Alibaba IPO lifting Yahoo & Softbank

With interest building up ahead of Alibaba’s mega IPO on Friday (September 19), some investors have turned to trading its ‘proxies’ such as Yahoo and SoftBank.

Alibaba sign on window
Source: Bloomberg

According to Alibaba’s recent regulatory filing, it is aiming to raise up to $24.3 billion when it begins trading on the New York Stock Exchange under the code BABA.

Alibaba has set an IPO range of $60 to $66 a share, although this could be revised prior to the listing depending on how much interest it gets.

While the Chinese internet giant is still on a roadshow drumming up interest, there are reports that the IPO is already oversubscribed.

Notably, Yahoo and SoftBank have seen their stock prices benefiting from the ‘Alibaba effect’. Both were among the early investors in the Chinese e-commerce giant.

Yahoo’s 23% stake could be worth $26 billion, while Japanese telecoms giant SoftBank is sitting on a 34.4% stake, valued at more than $50 billion after the IPO.

That has attracted plenty of investor optimism, especially from those not expecting to get access to Alibaba’s new shares.

Since August, Yahoo’s stock price has run up over 20%, while Japan-listed SoftBank has jump 25%.

Click to enlarge

Is it too late for investors to jump on board these proxies?

Looking at Yahoo on a four-hour chart, we can see the stock price is on a long-term uptrend. The MACD has just crossed over the signal line, which indicates a buy signal.

Click to enlarge

Traders can look to take advantage of the momentum in the interim and refer to last week’s high of$41.80 as a potential support level.

What should be noted is that the RSI is above 70 and in overbought territory. This indicates a pullback could be on the cards once other indicators turn more bearish, such as if MACD crosses below the signal line.  More conservative traders can consider waiting for dips to buy on the uptrend.

Many similarities appear on SoftBank’s stock price chart, we can see an uptrend and some overbought signals because of the recent rally.

The stock price has broken through its recent resistance level of 7,902 yen and looks set to test its five-month high of 8,464 yen. If it breaks above this level, the next resistance it will test will be the 14-year high at 9,317.

There’s still a lot of positive momentum, as suggested by the Momentum indicator. The RSI, which is a lagging indicator, is pointing towards it being overbought. More conservative traders can wait for a retracement to support for a better entry.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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