walmart's 'clearance-style' shareholding reduction! Is jd.com's future not looking good? (2024.08.21)

Hello, in this week's Technical Tracking, let's analyze the Chinese e-commerce giant— $JD.com(JD.US)$.

Hot events

On Tuesday, August 20, 2024, the second largest shareholder of jd.com, the global retail giant $Walmart(WMT.US)$ Announced a liquidation-style reduction of its stake in JD.com worth about $3.6 billion, marking the possible end of the strategic cooperation between the two companies for the past eight years. As soon as the news came out, JD.com's stock price plummeted 9.5% in post-market trading!

According to Bloomberg, unnamed sources revealed that walmart sold 0.1445 billion shares of JD.com at a price of $24.95 per share, accounting for nearly 10% of JD.com's total share capital. This selling price represents an 11% discount compared to the closing price of JD.com on Tuesday.

Walmart's warehouse-style Sam’s Club has shown remarkable growth in China. According to data from the China Chain Store Association, Sam’s Club was the only one among the top five hypermarkets last year to record sales growth. In view of this, Citigroup pointed out in its research reports that Walmart is expected to strategically reinvest the proceeds to expand its own stores in China.

Walmart's warehouse-style Sam's Club is very eye-catching at the China Hair Expo. According to data from the China Chain Operations Association, among the top five hypermarkets last year, Sam's Club was the only one that recorded sales growth. In view of this,$Citigroup(C.US)$ stated in a research report that Walmart is expected to strategically reinvest the proceeds from the divestment to expand its presence in the Chinese market.

Currently, the Chinese economy is facing a series of uncertainties, coupled with changing consumer preferences and the rise of new e-commerce platforms, which has put traditional e-commerce giants in a difficult position. A significant signal is that Alibaba, which has long been regarded as an industry barometer, unexpectedly saw a decline in its e-commerce business in the second quarter, which has raised alarm bells for investors.

Technical analysis

Trend analysis:

In February 2021, JD.com's stock price reached a historical high of $101, and has since been in a downward trend. From the weekly chart, the stock reached a five-year low of $20 in January 2024, forming a "head and shoulders bottom" pattern at the bottom, with the neckline roughly around $28. From the lowest point, the stock price rebounded by over 60%.

The daily chart shows that in the past few months, JD.com's stock price has reversed downwards again and has fallen below the crucial neckline of the head and shoulders bottom pattern.

Indicator interpretation:

● JD.com's stock price is currently near the 50-day moving average (MA50) and the 200-day moving average (MA200), and these two moving averages have recently shown a sideways trend, indicating a balance of power between buyers and sellers and a lack of clear direction in the market.

● In the recent downward trend, the RSI and KDJ indicators have shown a "bullish divergence" signal, and the subsequent rebound in the stock price has confirmed this signal. However, due to the negative news of Walmart clearing its position, JD.com's stock price quickly turned downwards again, rendering these technical indicators less meaningful in the short term.

Areas of Focus

As jd.com's most important institutional shareholder, Walmart, during the downturn of jd.com's stock price, decisively chose to discount and clear its holdings in the latter's shares, implying that it may not be bullish on jd.com's future development prospects, which will to some extent undermine the confidence in the capital markets. In the short term, investors can pay attention to around $28, the neckline position of the head and shoulders bottom formation, this key level may represent a short-term turning point.

This content discusses technical analysis. Other methods, including fundamental analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.

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