NetEase Inc. (NTES) - Get Report is on the rise pre-earnings after holding its weekly value level at $233.41. If NetEase pops above its monthly risky level at $240.74, the Chinese Internet technology company has upside to my annual risky level at $292.19.
The stock closed up 1.29% Wednesday at $232.60 -- in bull market territory, still far above its 52-week intraday low of $184.80 set on Sept. 11. Longer term, it's been a volatile ride for NetEase. Since the stock set its all-time intraday high of $377.64 on Dec. 31, 2017, it's had a bear market decline of around 39.2%. Even so, the stock is on the cusp of its 200-day simple moving average at $234.31. The stock has been tracking its 200-week simple moving average higher since the week of Aug. 17. I consider this important moving average as the technical "reversion to the mean", which is now at $226.24.
Analysts expect NetEase to report earnings between $2.45 and $2.69 a share when it reports after the closing bell on Wednesday, Feb. 20. The stock is on the rise pre-earnings on a report that Amazon's (AMZN) - Get Report Chinese business is in merger talks with NetEase's Kaola e-commerce unit. Kaola sells products on-line such as apparel and household appliances. NetEase will be an interesting stock to watch during the wait for the trade deals being negotiated between the U.S. and China.
The Daily Chart for NetEase
Courtesy of MetaStock Xenith
The daily chart for NetEase shows the slow rise since trading as low as $184.60 on Sept. 11. The stock close at $235.37 on Dec. 31 was the input to my proprietary analytics. This resulted in my annual, quarterly and semiannual risky levels at $292.19, $323.67 and $368.37, respectively, and the first two are shown as horizontal lines on the chart. The Jan. 31 close of $251.93 resulted in my monthly pivot at $240.74, which was a magnet between Feb. 7 and Feb. 15. My weekly value level is $233.41. These two levels are shown as horizontal lines on the chart.
The Weekly Chart for NetEase
Courtesy of MetaStock Xenith
The weekly chart for NetEase is negative with the stock below its five-week modified moving average of $237.58. Note how the stock has been tracking the 200-week simple moving average or "reversion to the mean" higher since the week of Aug. 17 when the average was $209.85 and at $226.24 Wednesday. The 12x3x3 weekly slow stochastic reading is projected to fall to 57.12 this week down from 66.93 on Feb. 15.
Trading Strategy: Buy weakness to the 200-week SMA at $226.24 or on a price gap above my monthly pivot at $240.74. If the stock is above the 200-day SMA at $234.31 and my weekly pivot at $233.41, a positive earnings report is more likely. Reduce holdings on strength to its annual risky level at $292.19.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.