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JD Stock Falls on Tencent Sale: Buy the Dip or Stay Away?

JD stock is falling hard on Thursday as Tencent reduces is stake in the company. Here's where support is on the charts.

For most of the stock market, traders are taking it easy on Thursday. It’s the last trading session of the holiday-shortened week. That’s not the case for JD.com  (JD) - Get JD.com Inc. Report though, which is down 6.5%.

Along with stocks like Tesla  (TSLA) - Get Tesla Inc Report, JD.com was an early premarket mover. But unlike Tesla and its premarket gains, JD.com was under significant pressure.

The reason? Tencent dumped over $16 billion worth of its stock, selling a huge chunk of its stake amid China’s crackdown on technology firms.

The move will ultimately leave Walmart  (WMT) - Get Walmart Inc. Report as the largest holder of JD stock, with a stake of 9.3%.

The dip sent shares to new fourth-quarter lows and was not the pre-holiday news that bulls were looking for.

Chinese tech stocks were already faring bad enough going into the end of the year. What does the latest dip do to the charts now?

Trading JD.com Stock

Daily chart of JD.com stock.

Daily chart of JD.com stock.

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Earlier this week, JD.com stock broke below the fourth-quarter low at $68.83.

However, the stock was able to bottom and give bulls a quick two-day rebound back over the weekly VWAP measure. That rally stalled at the 10-day moving average, although it’s hard to pin today’s decline on that catalyst alone.

With today’s gap-down action, we have a new fourth-quarter low in JD.com. However, it’s encouraging to see the stock rally back up through the two prior lows we have already mentioned.

Now JD.com has to contend with $70 and the weekly VWAP measure. If it can reclaim this area, the 10-day moving average will be back in play.

Should JD.com stock really catch some momentum — and push through these levels after bad news, no less — then the 200-day and declining 21-day moving averages will be on the table.

As for the downside, let’s keep an eye on Thursday’s low at $66.18. If JD trades back below this level, I expect a dip down to the $62 area. Twice this summer that level acted as strong support.

In just a couple of days, traders will get new monthly, quarterly and annual charts to examine. Coupled with the bullish divergence on the chart’s RSI reading and perhaps bulls will have more opportunities with JD stock in 2022.