JD.com (JD) - Get Report was primed for a positive earnings report with the stock above a "golden cross" on its daily chart and with a positive weekly chart. My call is to book profits on strength to its weekly risky level at $35.56 and buy weakness to its monthly value level at $31.71.
The company reported a surge in online sales in the third quarter.
JD.com is a China-based e-commerce giant and a competitor to Alibaba (BABA) - Get Report . In the U.S., the company is backed by both Walmart (WMT) - Get Report and Alphabet (GOOGL) - Get Report . Here's the coverage of the earnings report on TheStreet.
Shares of the stock have been on a strong momentum run so far in 2019. Thursday's close of $33.57 shows the stock up 60.4% year to date and in bull market territory 74.8% above its Nov. 23, 2018 low of $19.21. The stock opened Friday setting a new 2019 high of $35.43, above the Nov. 12 high of $34.09.
Longer-term the stock is consolidating a bear market decline of 62% from its all-time intraday high of $50.68 set in February 2018 to its November 2018 low of $19.21.
The Daily Chart for JD.com
Courtesy of Refinitiv XENITH
The daily chart for JD.com shows the formation of a "golden cross" on April 11 when the 50-day simple moving average trended above the 200-day simple moving average to indicate that higher prices lie ahead. Whenever a "golden cross" is confirmed, the trading strategy is to buy weakness to its 200-day SMA. This opportunity occurred many times between May 9 and Oct. 8 as shown on the green line on the chart. The 50-day and 200-day simple moving averages are now at $30.83 and $29.24, respectively. The close on Dec. 31 at $20.93 was an important input to my proprietary analytics and its annual value level is well below the chart at $15.39. The close of $30.29 on June 28 was another important input to my analytics and its second half value level is $28.13 which was tested several times as a buying opportunity between Aug. 1 and Oct. 9. The close of $28.21 on Sep. 30 was an input to my analytics and its quarterly value level is $25.08 has yet to be tested. The close of $31.15 on Oct. 31 was an input that resulted to its November value level at $31.71. My weekly risky level is at the top of the chart at $35.56.
The Weekly Chart for JD.com
Courtesy of Refinitiv XENITH
The weekly chart for JD.com is positive with the stock above its five-week modified moving average of $31.58. The stock opened the week of Nov. 8 above its 200-week simple moving average or "reversion to the mean" at $31.51 as a buy signal. The 12x3x3 weekly slow stochastic reading is projected to end this week rising to 78.43 up from 73.48 on Nov. 8. A year ago, when the stock bottomed at $19.21 this reading was 7.73 well below the 10.00 threshold making the stock technically "too cheap to ignore." This began the rally that now totals 75%.
Trading Strategy: Buy weakness to the monthly value level at $31.71 and reduce holdings on strength to its weekly risky level at $35.56.
How to use my value levels and risky levels:
Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play.
The close at the end of June 2019 established new monthly, quarterly and semiannual levels. The semiannual level for the second half of 2019 remains in play.
The quarterly level changes after the end of each quarter so the close on Sep. 30 established the level for the fourth quarter.
The close on Oct. 31 established the monthly level for November.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.
To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
How to use 12x3x3 Weekly Slow Stochastic Readings:
My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.
Recently I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble" as a bubble always pops. I also call a reading below 10.00 as being "too cheap to ignore."
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.