E-Tail Stock's Luck Could Turn Around in August

The equity underperformed last month

Digital Content Manager
Aug 4, 2022 at 12:03 PM
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JD.Com Inc (NASDAQ:JD) is getting a boost today, last seen up 3.3% at $63.12, likely sparked by sector-peer Alibaba's (BABA) post-earnings pop. Unlike most of the market, JD suffered a 7.4% drop in July, with several breakout attempts thwarted by the 180-day moving average. The security is once again running into pressure at this trendline. However, JD has already tacked on 6.5% in August, and there's evidence the China-based e-tail stock could see even more upside as the month continues. 

Specifically, JD stock just pulled back within one standard deviation of its 80-day moving average after a lengthy period trading above the trendline. According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, five other similar instances occurred in the last three years. After 80% of these occurrences, JD enjoyed a positive one-month return, averaging a 4.7% jump. A similar move from its current perch would put the security just above the $66 level, marking a breakout above the aforementioned 180-day moving average. 

jd aug 4

Sentiment surrounding JD is already quite bullish. Just one of the 10 analysts in coverage considers the stock a "hold," compared to nine "buy" or better ratings. Plus, short interest dropped a whopping 29.7% in the last two reporting periods. 

Meanwhile, short-term options traders are taking a call-heavy stance. This is according to the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.64, which sits higher than just 12% readings from the past year. 

Considering this, now might be the perfect time to speculate on JD's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 53% sits in the relatively low 20th percentile of its annual range. In other words, options players are pricing in lower-than-usual volatility expectations at the moment. 

 

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