Is Stock Reputation Justified ?

If you have ever traded stock or if you are looking to trade it in the future, this tutorial is for you.

Many who have experiences with stock are often frustrated by the way it day trades.

We will take you through what you need to know to avoid being on the short end of the stick while trading stock. Stock Historical Overview is a Beijing China based e-commerce company that sells goods such as: home appliances, digital products and electronics on its website.

The company has over 550 warehouses in 81 cities with almost 180000 employees to serve its large customers base.

Third-party sellers are allowed to sell their products to JD customers as well.

Many argue that is the Amazon of China.

Yes, not Alibaba its home rival.

JD Stock Price

That says a lot given what some of us may know about the previously mentioned rival. (Ticker: JD) went public in the US in May 2014 at the modest price of about $22.

Fast Forward seven years later, it is currently trading around $38 at the time of this writing (February 2020).

And that lies the problem for a supposed to be e-Commerce giant.

Here is the monthly chart of the company stock from inception to early February 2020.

Is Stock Reputation Justified - TradingView Stock showing monthly candles from may 2014 to January 2020 TradingView Stock showing monthly candles from may 2014 to January 2020

Before I go through the chart, here are some of the fundamentals that have gotten many excited for years about this stock. Earnings

Sales have grown from $ 16.7 Billion to $67 Billion between 2014 and 2018.

The average sales growth over this period is 42% though decreasing year-to-year.

The Earnings per share have been improving massively in the same period with first yearly profit reported in 2017.

Yet, the chart above does not resemble a high growth stock type chart.

The stock has failed on multiple occasion to breakout above $40.

The most recent attempt in January 2020 was thwarted by the CoroanaVirus situation in Wuhan.

Prior to that, in 2018 more precisely, an all Time High just above $50 was met with a CEO moral scandal.

That led to several months long sell-off to$19.68 in December 2018.

To the point where has developed a reputation among traders in the trading sphere. Stock: Perception on Stocktwits Community has a decent community of followers on with just shy of 35000 fans.

Even the most loyal investors are growing awry of the price action of this stock.

Here is an example I picked up recently to illustrate the general state of mind.

Is Stock Reputation Justified ?- JD stock Stocktwists Post between two followers complaining about the the struggle of stock
JD stock Stocktwists Post between two followers complaining about the the struggle of stock

Despite the many years of lack of progress in the JD stock value, some find solace in the fact that they were able to average own during the many lows as per the first chart.

Even day traders have their beef with this stock.

How can that possibly be ? I decided to do a deep dive and conducted my own research to unveil ailment.

It wanted to used illness but I refrained given the current context in early February 2020.

Our Research on Stock

My goal was to find out detailed characteristic on how (Ticker: JD) trades.

Are there any patterns to be unveiled out of this scrutiny other than the obvious inability of the stock to grow over time ?

In order to accomplish this, I downloaded JD stock daily price (Open, High, Low , Close) from none other than…

You guessed it Yahoo Finance of course.

The tested hypothesis was the following: Does Stock often fade during the trading day ?

In other words, does the stock display a consistent pattern of giving back gains ?

We analyzed its daily price action from January 2017 through December 2019.

Here are our findings:

  • 48% of the time, 372 days out of 771, stock Close is at least 1.25% lower than the High of the day
  • This number was 39% in 2017, 56% in 2018 and 50% in 2019.
  • The Day of the Week with the Most occurrence is Tuesday
Is Stock Reputation Justified - Table of JD Stock Number of Fading days from 2017 to 2020 where Closing Price is more than 1.25 percent below High of the Day as discussed in Is Stock Reputation Justified
Table of JD Stock Number of Fading days from 2017 to 2020

The table above is a summary of the full data set for our Research analysis.

How To Benefit From This Knowledge

With the results of the research above, may I suggest that a better way to trade JD stock is through options trading ?

Why ?

Because in Options trading, you as a trader can hold a long and short position simultaneously thus making it stress free about the short term variation of the price. Option Chain is very liquid and the volatility is manageable is you stay away from the weeks of Earnings.

Here is a great example of how to made money trading JD stock post Earnings recently.

Reasonable Option contracts can be bought for as low as $10 or even cheaper if you employ one of our Expiration Day strategies.

Of course, stock as many others is featured on where you can perform a Screening analysis on this Ticker on Days with High movement as we described here.

Our Final Verdict

We answered the question on why has a malign reputation among traders especially on

Then we offered an alternative to JD stock “fading” problem by using Options.

These are cheaper and provide hedge to par against any undesired behavior of the underlying stock.

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“Risk Comes From Not Knowing What You Are Doing” – Warren Buffet

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