In my last review of Shanghai-based e-commerce and mobile platform Pinduoduo Inc., now PDD Holdings ( PDD) ,on November 28, I wrote that "Sometimes an upside price gap can become an island reversal or an exhaustion gap instead of a new leg higher. I am in no rush to be a buyer of PDD." The Point and Figure charts showed price targets of $98 and $138.
Let's review the charts again in light of the firm's top and bottom line misses.
In this daily bar chart of PDD, below, I can see that prices reached our $98 Point and Figure price target but stopped well short of the weekly target. The price rally began to stall back in December and the trend turned sideways. Today prices gapped to the downside leaving the 50-day moving average line in the dust and breaking the February lows.
The trading volume has increased on this move lower and the daily On-Balance-Volume (OBV) line should turn lower. The Moving Average Convergence Divergence (MACD) oscillator is bearish as it stands below the zero line.
In this weekly Japanese candlestick chart of PDD, below, I see a mixed picture. Prices are pointed down towards a potential test of the rising 40-week moving average line. The weekly OBV line has struggled for at least three months. The MACD oscillator is poised for a downside crossover and take profit sell signal.
In this daily Point and Figure chart of PDD, below, I can see a downside price target in the $57 area.
In this weekly Point and Figure chart of PDD, below, a price target in the $66 area is shown.
Bottom line strategy: It looks like the bears have gained control of shares of PDD. Avoid the long side for now.