Shares of the Chinese Internet retail company are heading lower on heavy volume just two sessions after the stock surged amid a U.S. traded China-based stock rally.
Last week, the People's Bank of China infused 80 billion yuan ($12 billion) into the country's banking system ahead of the week-long Chinese holiday celebrating the Lunar New Year. That cash infusion lifted U.S. traded Chinese stocks across the board.
Today, TheStreet Ratings lowered its rating to "sell" from "hold" while also lowering its later grade to D+ from C-. The primary factors that have impacted this decision include weaknesses multiple areas, such as its unimpressive growth in net income, generally disappointing historical performance in the stock itself and poor profit margins.
TheStreet chartist Bruce Kamich commented on JD.com today, and he is in agreement with the ratings downgrade.
"In early January, JD broke down (see the chart above) from a rising wedge pattern we identified in previous stories. The subsequent decline wiped out all of the previous rally, but prices haven't bottomed yet. We can see that the slope of the shorter 50-day and the longer 200-day averages are pointed down," Kamich said. "The On-Balance-Volume (OBV) line is in a downtrend, telling us that sellers of JD are more aggressive than the buyers. There is a small bullish divergence between the lower lows in price and the momentum study. The rate of decline in the price of JD has slowed, but still the trend in down. With the quantitative downgrade of JD, we remain pessimistic."
"This chart of JD, above, doesn't add much more in the way of history, but it does show that there is not much at all in the way of support below $22. A weak close below $22 on JD could precipitate a deeper decline to the mid-teens," said Kamich.
TheStreet Ratings uses an algorithmic model to determine a rating for risk-adjusted total return prospect over 12 months.