It’s been risky business for investors in JD.com (NASDAQ:JD) this year on more than a few fronts. But as 2019 approaches there’s still a couple good reasons to consider shorting shares today and maybe buying JD stock after shares go further down the road less traveled in the weeks ahead. Let me explain.
From a scandalous and still unresolved rape charge leveled against CEO Richard Liu, to technically risky broken necklines on the price chart and growth fears tied to the impact of a worsening trade war between China and the U.S.—it’s been tough business owning JD stock in 2018. And mind you, those problems haven’t gone away.
A Quick Overview of JD Stock
Nevertheless, JD stock has been severely punished. Translated on the price chart, shares of JD.com have shed 50% this year. Even worse, JD stock has been penalized by as much as 62% at its recent and new all-time-lows.
Bottom-line, nobody knows the full extent of the risks or rewards with owning JD stock. Of course, that’s not to say there aren’t very smart investors willing to put in their two cents. At InvestorPlace we’ve had our share of JD bulls in recent days to be sure.
There’s also been those like Vince Martin. Vince recently offered a mea culpa warning and graciously threw in the towel for for the time being with the risks at JD stock having simply become too great.
And now and with this strategist stepping up to the plate, we also have a card-carrying resident bear in the mix at InvestorPlace until proven otherwise.
JD Stock Weekly Chart
On the weekly price chart we can see JD stock’s abominable performance has put shares into a key triple-bottom testing position as it challenges the prior lows from 2014 and 2017. And given that a bearish head-and-shoulder topping pattern has been fulfilled at roughly the same time, there’s certainly reason to be optimistic JD stock’s worse days are behind it. But I’m not a buyer.
On the other hand, shares of JD have put together an inverse cup-with-handle or what some might call a bearish flag continuation pattern. With JD stock’s weekly stochastics overbought and shares having just affirmed the pattern as it traded beneath the low of last week’s candlestick; as noted above, JD is a short until proven otherwise.
The Bottom Line on JD Stock
For like-minded traders willing to take on a short stock position today, the recommendation would be to respect and use last week’s pattern high of $23.50 as a stop-loss to exit shares.
Ultimately, a move through that level would be sufficient evidence of being proven otherwise in our opinion and probably grounds for going long JD stock.
Alternatively, bearish traders may wait for a bit more price confirmation and only short JD stock if shares do take the road less-traveled—or in this instance, hit new all-time-lows below the flag.
For this type entry, a percentage-based stop-loss of 8% – 10% to contain the short exposure makes sense. And if that were to occur, going long JD and reversing the short would be an even stronger consideration after bears elected to make a U-turn from their journey on the road less-traveled.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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