How to Trade JD.com After a Mixed Earnings Reaction

JD.com reported a top- and bottom-line beat. So why is the stock flat and giving up its gains? Let's look at the chart.
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Shares of JD.com  (JD) - Get Report looked like they were ready to make another run to the upside on Thursday. 

The stock has been on fire over the past couple of months and enjoyed a strong finish to 2020.

The stock opened higher by about 5.5% after the company beat on earnings and revenue expectations. Fourth-quarter revenue jumped about 40% year over year as well, as strong growth helped initially propel the stock higher.

However, sellers have stepped in at the open, despite it also being a strong day in the stock market, particularly in tech.

Perhaps it was the news surrounding Alibaba  (BABA) - Get Report that spooked investors, with the company continuing to butt heads with regulators in China.

In any event, it leaves the stock stuck between two key levels. Let’s look at the chart for more clarity.

Trading JD.com

Daily chart of JD stock.

Daily chart of JD stock.

Notice the strong trend that JD stock has been riding for several months now. More specifically, shares have been riding the 50-day and 100-day moving averages higher, most recently bouncing off the latter in December.

Now though, both of those measures are in question.

JD opened above the 50-day moving average on Thursday, but quickly lost this level as shares moved lower. For now, the 100-day moving average is acting as support, after briefly failing earlier this week.

So what now?

If the 100-day moving average fails as support, that does not bode well for bulls in the short term.

In that event, it will put this week’s low in play at $85.22. A break of that puts $80 support and the 200-day moving average on the table, which would likely offer investors a reasonable dip-buying opportunity.

On the upside, bulls want to see JD stock reclaim the 50-day moving average. More than that though, they want to see shares push through Thursday’s post-earnings high and the 21-day moving average, the latter of which rejected the stock shortly after the open.

If it can do that, bulls will likely have the $100 mark in mind, followed by a gap-fill up toward $105 to $105.50. 

For now, the reaction is mixed and so are the technicals. Let's see if we get more clarity by the end of the week.