Shares of Chinese e-commerce company JD.com, Inc. (JD) popped higher on better-than-expected earnings. The stock also benefited on a day that President Trump decided to delay the implementation of additional tariffs, which essentially assured that new tariffs would not be a drag on 2019 holiday shopping.
JD.com stock closed Tuesday, Aug. 13, at $30.66, up 46.5% year to date and in bull market territory at 59.6% above its Nov. 23 low of $19.21. JD.com set its 2019 high of $32.38 on July 25 and is currently trading 5.3% below this level.
Many investors around the world may not be aware that JD.com is one of the largest e-commerce platforms on the planet in terms of sales. The company is expanding its global reach through new partnerships with luxury brands such as Prada and Mulberry. In total, there are more than 20 brands that have joined the JD platform since April. The company now offers a membership program called JD PLUS to compete with Amazon.com, Inc.'s (AMZN) Prime membership.
The daily chart for JD.com
The daily chart for JD.com shows the formation of a "golden cross" on April 10, when the 50-day simple moving average rose above the 200-day simple moving average to indicate that higher prices would follow. The stock essentially moved sideways since this positive signal, and shares could have been bought along the 200-day simple moving average numerous times between May 9 and Aug. 7, with the average now at $26.37.
From the bottom up, the horizontal lines on the chart are the quarterly pivot at $26.74, which held at recent lows. The stock popped above its semiannual pivot at $28.13 on the positive reaction to earnings on Tuesday. The upside potential is to the monthly and annual risky levels at $34.28 and $36.47, respectively.
The weekly chart for JD.com
The weekly chart for JD.com is neutral, with the stock above its five-week modified moving average of $29.43 but below its 200-week simple moving average, or "reversion to the mean," at $31.44, last tested during the week of July 26. The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 58.70 this week, down from 65.51 on Aug. 9.
JD.com does not have a long history as a publicly traded company. Note that the stock is consolidating a bear market decline of 62% from its all-time high of $50.68 set during the week of Feb. 2, 2018, to the low of $19.21 set during the week of Nov. 23, 2018.
Trading strategy: Buy JD.com shares on weakness to the semiannual and quarterly pivots at $28.13 and $26.74, respectively, and reduce holdings on strength to the monthly and annual risky levels at $34.28 and $36.47, respectively.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, most recently on July 31. The quarterly level was changed at the end of June.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.