Don't Ignore This Chart

NetEase.com Getting Crushed After Earnings; The Bad News? The Selling Isn't Over

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After the bell on Wednesday, NetEase.com (NTES) was hammered as its Earnings Per Share (EPS) of $3.86 fell short of Wall Street consensus estimates of $4.07.  While that was bad enough from a fundamental perspective, the technical conditions had already begun to deteriorate in the form of a weekly negative divergence on its MACD.  That is a signal of slowing upside price momentum and that, coupled with the fundamental miss, has sent NTES shares reeling today as internet stocks ($DJUSNS) struggle.  Here's the long-term weekly chart on NTES:

In my Trading Places blog article from yesterday, "Brace Yourselves, The Summertime Doldrums Have Arrived", I delved into the internet stocks and pointed out three stocks in the group that were looking at technical troubles ahead and NTES was one of them.  They had no margin for error with their quarterly earnings release and that EPS miss triggered what will likely become a period of intense selling the next few weeks.  I see the 260-265 area being tested quickly and then we'll see if price support there holds.  If not?  Next stop would be 210-215.

Happy trading!

Tom

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Tom Bowley
About the author: co-founded Invested Central and served as the site's Chief Market Strategist for more than 10 years. His unique trading style combines both his fundamental and technical strategies to systematically manage risk while trading. A regular contributor to StockCharts.com's bi-weekly ChartWatchers newsletter since 2006, Tom's role at StockCharts has expanded significantly since he joined the company as a full-time Senior Technical Analyst in March of 2015. Learn More
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