By Doug Busch
Chinese equities may be showing early signs of stabilization after an extended period of weakness. Recent price action suggests a bottoming process could be underway. While volatility is likely to persist, the recent shift in momentum has prompted some investors to consider whether Chinese stocks may be entering the early stages of a turnaround.
As a whole, the iShares China Large Cap ETF is looking at consecutive 4% weekly losses, its worst stretch since last April. It now trades about 14% below its most recent 52-week high and has recorded two spinning-top candles this week, indicating that selling pressure may be abating. Two top-10 holdings in the fund stand out.
Alibaba Group, a Chinese e-commerce and technology company, now trades 32% below its most recent 52-week high. It is on a five-week losing streak and is down another 9% this week as of Friday afternoon. That streak began with a doji candle in the last week of January.
Looking at its daily chart, some indicators suggest that the stock may be starting to bottom. The stock is now retesting a symmetrical triangle breakout from Aug. 29, 2025, when shares jumped 13% on heavy volume after a well-received earnings reaction. The stock is also deeply oversold, trading well below the 30 level on the relative strength index ( RSI). It last reached that level last April, when the stock found a floor around the $100 level and went on to nearly double into October. There appears to be an attractive risk/reward entry point, with the stock potentially moving toward $160 by mid-2026, a gain of about 22% from current prices. If strength continues to materialize, investors could add above a double bottom pivot of $181.20. Remain bullish above $119.
Alibaba Group was trading around $131 Friday.
NetEase, a Chinese online gaming and technology company, is 26% off its most recent annual peak. The stock has not recorded back-to-back weekly gains since last August. One month ago it recorded a bearish death cross on the daily chart, though such signals often occur after much of the technical damage has already been done.
Looking at its weekly chart, the stock is poised to end an eight-week losing streak, up 3% late in the week, suggesting a bullish engulfing candle may form. Admire how it is retesting a prior cup with handle breakout pivot of $110.25 from the week ending May 16, 2025, which jumped an impressive 16%. Notice it is very close to the oversold 30 RSI level. Last summer, this level produced a sharp rebound after a doji candle suggested a potential trend change. The stock could reach $150 by mid-2026, representing a roughly 27% gain from current prices. Remain bullish above $111.
NetEase was trading around $118 Friday.
The backdrop for Chinese equities is turning increasingly favorable, providing a potentially attractive entry point for long-term investors.
Write to Doug Busch at douglas.busch@barrons.com
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(END) Dow Jones Newswires
March 06, 2026 13:15 ET (18:15 GMT)
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