How To Play Singles Day

Alibaba Group Holding Ltd. (NYSE: BABA) has its biggest weekend of the year: Singles Day. While American shoppers are gearing up for Black Friday and Cyber Monday, Chinese shoppers, particularly younger, single shoppers, are celebrating the Chinese version of an anti-Valentine’s Day by snatching up huge deals on Alibaba’s e-commerce platform.

Expectations Are High

Alibaba registered $12 billion in gross merchandise volume in its first two hours of Singles Day sales on Friday, and analysts are expecting this year’s event to be the biggest ever. Citigroup is calling for $23.8 billion in weekend sales, which are expected to peak at a rate of up to 256,000 transactions per second.

Those numbers would be huge market movers for most stocks, but Alibaba shares have been on a tear so far in 2017, and expectations are high. Alibaba stock is now up 92.8 percent from its closing price the day before last year’s Singles Day holiday.

Troubling Track Record

With those kind of gains already in place, it may take some huge sales numbers to move the stock on Monday, with analysts calling for a roughly 30 percent increase in Singles Day sales. Here’s a rundown of how the stock has traded on Singles Day in the past:

• 2014 Singles Day: -3.6 percent
• 2015 Singles Day: -1.9 percent
• 2016 Singles Day: -3.4 percent

• How To Play It

• Alibaba doesn’t have a strong track record of short-term Singles Day gains, meaning traders should brace themselves on Monday morning.

For the first time ever, U.S. investors will have a chance to digest the Singles Day numbers over a weekend and watch to see how the Chinese market reacts before the U.S. market opens on Monday.

Joel Elconin contributed to this story.

Disclosure: The author is long BABA.

Related Link:

Here's How Alibaba Trades The Month Following Singles' Day

How Did Singles' Day Become A Billion-Dollar Event?