JD’s massive sell-off hints at imminent price wars with rivals

China's largest online retailer, JD.com (JD) has made several strategic moves to expand its business and enhance its competitiveness in 2023. The executive director of investment strategy joined G42's $10 billion tech fund to focus on Chinese deals, solidifying JD’s intentions to use artificial intelligence as a driving force for its business decisions. Will these approaches be enough to make a difference? Will it trigger a rebound, or will JD continue to drop?

JD Technical anaylsis

JD share price has lost most of its gains from the last quarter of 2022, and the price is now trading well below all technical indicators. The company’s earnings report for the fiscal quarter ending December 2022 is set to be released on Thursday, 9 March, before market-open. The consensus EPS for Q4 is $0.37 compared to Q4 2022’s $0.09.

As China has eased its Covid-related restrictions and reopened its economy, companies throughout the country are getting ready for intense price wars to gain back market share. JD intends to spend around $1.5 billion to subsidize its campaigns, improve prices, and boost the image of a low-cost e-commerce platform. This might increase their sales, but it will cut down their profit margins, which is not very pleasant news for investors. 

The current ratio of the company is at 135%, showing its ability to repay the short-term liabilities with the current assets. The subtle hints of the approaching price wars may have some shareholders running for the exit already, which could drive stock prices down if the masses are triggered.

From the technical analysis perspective, JD stock price has been making consecutive losses in the last month and is currently trading just above the 78.6% of the daily Fibonacci retracement level. 

The aggressive sell-off of the shares has yet to cause a crossover of the 50-day moving average. Prices remain below the 100-day moving average, which shows that the bulls got caught off guard and didn’t react to this move.

The Stochastic oscillator is recording oversold levels and, in combination with the technical support around $42.25, the price might face strong support around that area causing a short-term correction to the upside.

Fundamentals and technicals both support a coming rise, but not with anything concrete and not with any usable timeline, so traders should be cautious about leverage settings. Tech-related stocks will likely continue to show volatility in the coming quarter, so be sure to make your own technical analysis and conclusions on the day of trading.

This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.

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Author:

Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.