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Investors calling bottom in Alibaba

Jack Ma
Rubin Sprich | Reuters

A measure of buying interest, which has called the bottom in three stocks so far this year, is signaling the selling may be over in Alibaba.

After wowing Wall Street with the largest IPO ever last September, the Chinese e-commerce retailer embarked on a vicious bear market just two months later.

With the stock's value down by almost a third from its all-time high in November, many investors are saying the bottom is here.

Retail buyers have finally come in at around the $80 mark, according to data exclusive to CNBC Pro that tracks more than 6 million TD Ameritrade accounts.

The previous two weeks, as shares cratered further, the retail trader was selling the stock big time. But this week, Alibaba jumped into the top three stocks traded out of all U.S. securities, according to TD, and the buying is finally equal to the selling.

"The buyers have come back in and both sides are playing it equally so I think you may find a trading range or base here," said JJ Kinahan, chief strategist for TD.


Alibaba since IPO

Source: FactSet

Wall Street is holding its ground as well. After eight analyst updates in the last one month, the average price target remains at $111.21, according to FactSet, about 30 percent from here.

While many dismiss the small investor as the "dumb money," their track record has been stellar this year, according to the TD data. Increased buying by this crowd has preceded a rebound in shares of Facebook, oil and American Express. Their increased buying in gold last week has not yet come to fruition as the metal is little changed over a one-week period.

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While it's difficult to value IPOs because of their limited historical data, Alibaba appears to be close to a value after the big drop.

The so-called PEG ratio, which is the stock's price-earnings multiple divided by earnings growth for the next 12 months, stands at 1, cheaper than the PEG ratio for eBay and just slightly above the 0.8 ratio for Baidu.

But it's only cheap if that earnings growth comes through. The stock has been falling on fears competitor JD.com is taking market share and Alibaba's sales growth will slow because of it.