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One Chinese stock could forecast the global economy's next move

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One Chinese stock could forecast global economic recovery

Chinese stocks are underperforming the S&P 500 this year.

One name could foreshadow the group's next move, according to Matt Maley, chief market strategist at Miller Tabak. 

Alibaba "stock started rolling over in very early January before the Chinese stock market did and certainly before the global economy started to slow down. So in other words, its weakness was a good leading indicator to tell us that the coronavirus was going to have a bigger impact than a lot of people thought," Maley said Tuesday on CNBC's "Trading Nation."

Alibaba peaked in mid-January before tumbling 26% to a low in late March. It has rallied 15% since then. 

"It has bounced back very nicely along with the rest of the global stock market, but it's rolling back over the last couple of weeks as a lot of other markets have held up pretty well," said Maley. "One reason on the technical side that I'm a little worried about it, if you look at its MACD chart, it's rolling over, curling over at a lower level than it did back in January showing that this rally had a lot less momentum in it than the previous one did."

The move lower on its "moving average convergence divergence" suggests a reversal in trend. Maley adds that if it does roll back over and drops below $180, it could foreshadow a bigger problem with Chinese markets, and potentially the broader economy. 

Danielle Shay, director of options at Simpler Trading, says Alibaba and the Chinese economy faces long-term headwinds, though she does see upside in the near future. 

"On a short-term basis, I love to trade Alibaba, and JD -- these two companies are companies that are in the e-commerce space, really big in China, also in the cloud and cybersecurity industries," Shay said during the same segment.

Shay added that there could be a positive catalyst for both companies. 

"These type of companies, they tend to rally going into an earnings report — about seven to 14 days prior to the report. This is a pattern that we see, and I love to trade in the options market, particularly with long calls in the options," said Shay. "While it may trade lower on a longer-term basis, for me as an options trader I still like to trade it on a seven to 14 day window going into the earnings report."

JD is set to report earnings on May 15. Alibaba has yet to announce when it will report -- it is estimated for later this month. 

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