Can JD.com Break Out Over Resistance on Earnings Beat?

JD.com is rallying on better-than-expected earnings and revenue. However, the stock is running into big-time resistance. Can shares break out now?
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While the rest of the market is under pressure Friday morning, JD.com  (JD) - Get Report was up slightly after reporting earnings.

Shares tagged new 52-week highs after an initial pop Friday morning, as investors sort a bevy of information. Trade tensions between the U.S. and China are flaring up at precisely the wrong time, although investors in JD.com seem to be shrugging off the news.

That's as earnings of 28 cents a share easily topped estimates by 19 cents, while revenue of $20.6 billion grew 20.7% year overyear and crushed expectations by $1.35 billion.

Better yet, guidance topped consensus estimates too. Management expects second-quarter revenue of 180 billion to 195 billion Chinese yuan vs. consensus expectations for 176.5 billion yuan.

With a report like this, it’s no wonder JD stock hit new annual highs on Friday. It seems to have given a boost to competitor Alibaba  (BABA) - Get Report as well, which is slightly higher on the day as well.

Trading JD Stock

Weekly chart of JD stock.

Weekly chart of JD stock.

At its high, JD stock rallied almost 4.2% on Friday. However, it shouldn’t be too surprising that it’s being rejected from the $50 area.

Back in early 2018, the $50 to $50.50 zone acted as stiff resistance. Shares tried to clear this hurdle in back-to-back weeks and ultimately failed. Trying to clear it again now, JD.com is flirting with a very significant resistance mark.

But where there’s significant resistance, there’s the potential for a big-time breakout.

If JD.com can close above $50.50, it sets the stage for a larger run higher on a possible breakout. That said, if I came into Friday long and saw such strong results, I would have wanted to see a break higher with confidence, something that pushed it into the low $50s.

In other words, the lack of bullish momentum on strong earnings is a bit concerning. If $50 is resistance again, investors need to be on their toes for a pullback.

The first area of interest comes near $46, which had been resistance over the past four to five weeks. A larger dip could send shares down into the $42 to $44 area.

There it will find the 78.6% retracement and a prior breakout zone (highlighted via a blue box on the chart). Further, JD stock will also find rising uptrend support (blue line) and the 20-week moving average.

I’m not sure what’s next for the market, but when it comes to JD stock, $50 is the level to watch. Above it is bullish, while below could lead to a dip.