When a well-known short-seller publicly abandons a position AND says the stock is still worth half its price, it usually shakes out other investors who were hoping the famous-name endorsement meant the bottom was in. Alibaba is already down 40% on worries

Verdict: wait — the headlines are real but the signal isn't there yet

This is a headline-driven short thesis, and the strongest thing it has going is genuine sentiment damage: per the Yahoo Finance pieces from August 24, Michael Burry abandoned his Alibaba stake over a broken management pledge while calling for the stock to halve, and Xpeng's weak delivery forecast the same week (per CNBC) fed the idea's broader loss-of-faith narrative. But the fundamentals cut hard the other way: Alibaba still grew revenue 8.1% to $148.4B with gross margin recovered to 39.8%, and Xpeng inflected to a company-best 18.9% gross margin with positive free cash flow of $5.1B — these are not businesses rolling over. Critically, the strategy's rules never triggered across 1,237 evaluated daily bars, and the parameter sensitivity evaluation ran out of its time budget without establishing a robust setup, so there is no validated configuration and no live signal to act on. BABA's MACD at +2.06 and XPEV's ADX at 17.6 both sit on the wrong side of their entry gates, making this a wait, not a trade. **Conviction breakdown** - **Thesis support (35):** the credibility shock is real, but shorting a 40%-down name with stable revenue against improving Xpeng numbers is a weak fundamental anchor. - **Trade readiness (15):** zero triggers in 60 months of evaluated bars and no robust parameter setup were established, so nothing is actionable. - **Risk quality (45):** the 2% fixed-risk cap and ~2:1 reward-to-risk framework are sensible, but XPEV's ~70% volatility and the basket's ~81% expected drawdown leave heavy tails. - **Trigger proximity (40):** BABA's ADX of 26.3 clears its gate but MACD is far off; XPEV is 2.4 ADX points short — partial, not confirmed. - **Fundamentals trend (30):** margins, growth, and cash flow at both companies contradict the deterioration the short requires.

Trade now

This is a watch-list setup, not a live signal: the strategy's rules were evaluated across 1,237 daily bars on Alibaba over the past 60 months and never opened an entry, so today's job is to monitor the trigger levels, not to press the short button. Alibaba last closed at $118.93, between nearest support at $117.93 and nearest resistance at $120. Momentum is only halfway to the strategy's requirements: the 14-day RSI at 36.5 is weak but not capitulatory, the 14-day ADX of about 26.3 already clears the 'above 20' trend-strength gate, but the MACD histogram near +2.1 sits on the wrong side of the 'below zero' trigger. Whether on-balance volume has crossed below its 20-day average cannot be confirmed with current data, so that condition remains unresolved. XPeng is closer to the template. It closed at $11.14 — down about 60% from its range high and sitting at its range low — with an RSI of 27.9 and a MACD histogram of about -0.7 that already satisfies the negative-momentum condition. The gap is trend strength: its ADX of roughly 17.6 is about 2.4 points short of the 'above 20' trigger, and on-balance volume still needs to cross below its 20-day average. In practice, 'wait' means XPeng needs another leg of sustained selling — roughly two to three more distribution days — to push ADX above 20 and force the on-balance-volume cross. If and when an entry triggers, the risk framework is explicit: a stop at roughly 2.7% adverse movement (fixed-risk sizing at the second resistance level), a take-profit at 5.3%, an effective reward-to-risk of about 2-to-1, and a hard time stop at 45 trading bars. For Alibaba, a near-term stop on a short would logically sit just above the $120 resistance shelf, roughly 2.7% away near $122. For XPeng, resistance at $12.00 marks the same invalidation zone. The two names are nearly uncorrelated day to day (a correlation of about 0.05 over 730 days), so this is not a doubled bet on one factor.

Why the bear case has real fuel

The bear thesis centers on a credibility shock: per the Yahoo Finance pieces from August 24, Michael Burry abandoned his Alibaba position over what he calls a broken management pledge, and separately argued the stock — already down roughly 40% on AI-disruption fears — still needs to fall by half. When a famous-name bear both exits and doubles down on the valuation call, the idea argues, the 'smart money has the…

Scores

• Conviction score breakdown: 33
• Thesis support: 35
• Trade readiness: 15
• Risk quality: 45
• Trigger proximity: 40
• Fundamentals trend: 30

Watch items

• XPEV — ADX (14)
• XPEV — OBV vs 20-day average
• BABA — MACD (12,26,9) histogram
• BABA — Close vs support
• BABA — Close vs 10-day EMA
• XPEV — Close vs resistance
• BABA — Price below 0
• BABA — MACD (12,26,9) below 0
• BABA — ADX (14) above 20
• BABA — ADX (14) below 15
• BABA — Price above EMA (10)