JD.com, Alibaba stocks gain after China pledges to support markets

Yahoo Finance Live's Jared Blikre breaks down how Chinese stocks are trading.

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BRIAN SOZZI: All right, China stocks have been sent into a frenzy this morning. The country's top financial policy body pledged to ensure stability in capital markets, support overseas stock listings, resolve risks around property developers, and finish a crackdown on tech companies, quote, "as soon as possible." And Jared, these stocks have been on fire all morning, Baba, you name it, some of the top trending tickers on our platform.

JARED BLIKRE: Yeah, but I got to call this a dead cat bounce. There's some good news here. China may be not being as antagonistic towards a lot of these big tech companies and a lot of the growth companies as they have in the past. But check out the YFi Interactive because this is a really interesting story.

I'm looking at some of these names, like KE Holdings up 45%. That's in the upper left. DiDi up over 40%. Pinduoduo 35%. But take a look at these charts.

So here is KE Holdings, that's down 85% over the last year. DiDi up 42% today. Well, down 87% over the last year. That doesn't include today's potential gains on the open, but my point is that this is a drop in the bucket for what they have to reclaim.

And the poster child for all of this, my favorite ETF that tracks China and those tech stocks, is the KraneShares ETF, and that is KWEB, That is down 73% over the last year. This year alone, down 39%. You can see most of that came over the last month.

So let's take a look at a candlestick chart here. And we're going to go back a year, in fact. And you can see from the peak over here, we have lost so much of this. And when we see investors flocking into this, they're not just buying the dip. There's actual short covering here.

But the problem is, let's say the price gets up to that 40 level. A lot of people who are getting in at this price level right in here, in this range, as soon as they get to break even, they might decide to sell. That's a very powerful and bad investor trade to have, but nevertheless, that guides a lot of price action. And so these moves can feed on themselves.

We could go back up to 50, 60, but I have to think that it's going to be a tough slog to get back to those record highs. Look at the peak here. That's not even a bulging bicep. I'm not sure--

BRIAN SOZZI: That is deflationary bicep, Jared.

JARED BLIKRE: I love it. I love it. We've got a new technical-- we've got a new technical formation here.

BRIAN SOZZI: Yeah, before we head to break, I do want to highlight Alibaba. Just as you were speaking, Jared, Alibaba moved to the top trending ticker on the Yahoo Finance platform. Its stock has just been absolutely thrashed, and deservedly so. Over the past year, Baba shares down about 67%. Here in the pre-market, up 20%. So some of those losses will be regained back, but still a brutally ugly chart for Alibaba.