Regulatory crackdowns have torpedoed the China tech trade.
Alibaba, Baidu, JD.com and Pinduoduo, some of the country’s largest tech companies, have collectively lost more than $500 billion in market cap since their February peaks as new anti-monopoly and data security rules in China threaten to weigh on profits.
With Alibaba, Baidu and JD.com trading at significant discounts to their historical price-earnings multiples, valuations may look compelling to those willing to shoulder the regulatory risks.
It’s worth being selective in the group, however, MKM Partners’ chief market technician, JC O’Hara, told CNBC’s “Trading Nation” on Thursday.
“When you look at a lot of these charts, they’re in downtrends, and downtrends to me say stay away,” he said.
One name that showed some technical promise was JD.com, O’Hara said.
The stock has begun to stabilize after breaking below longtime support at its 100-day moving average, which initially caused a roughly 40% decline, O’Hara said.
“I’m really focused on the $80 level. That is key chart resistance as well as that longer-term 100-day moving average,” he said. “If JD can put in a sustained close above that level, now we would have a stock that’s in an uptrend with attractive valuations. That’s when it becomes a buy for us.”