JD.com (JD) is taking a sharp hit following its second-quarter earnings report, with shares falling more than 7% today. Interestingly, the headline numbers weren’t terrible. Revenue came in at RMB 346.4 billion, slightly ahead of expectations, while non-GAAP net income increased about 20% from a year ago to RMB 8.9 billion.

The concern is what happened beneath those numbers. Revenue declined 2.9% year over year, marking JD.com’s first quarterly revenue decline in more than a decade. China’s sluggish consumer environment remains a headwind, although management expects electronics and appliance sales to improve during the second half of the year.

The chart is now showing a significant bearish shift. JD has fallen through its 8-, 21-, 55- and 233-day exponential moving averages. The PPO has crossed below its signal line and momentum is accelerating to the downside. The directional indicators tell a similar story, with -DI jumping to 40.63 versus +DI at 24.14. ADX has climbed to 35.46, suggesting the current move has considerably more trend strength than many of the recent swings.

The area around $28.75-$29.00 is important. JD is testing that support now, so chasing today’s decline carries additional risk. However, if shares decisively break and remain below this area, the next support sits near $27.70, followed by the $26 area. On the other hand, a rebound back through the broken moving averages would weaken the bearish argument.

JD’s earnings reaction has turned what had been a strong July/August recovery into a potential technical breakdown. The next move around $29 should help determine whether today’s selloff is simply an earnings overreaction—or the beginning of a larger move lower.

Wishing you the best,

Wendy