*TA as of 24/2/24. But no change to the overall thesis.
Hi everyone! Today I’ll analyse a Latin-American e-commerce company:
MercadoLibre, Inc. (NASDAQ: MELI)
Let’s take a look at the weekly trend. MELI is forming a series of higher lows (ascending black trendline), and previously a series of higher highs. Note that we have not seen a higher high since 2021. During the 2022 bear market, MELI finally retested its long-term trendline, before trading in what appeared to be a bearish ascending channel (green trendlines). However, once we broke over 1,200s, it became clear this was merely a sustained uptrend from a higher low. Recently, MELI broke out of its channel, before a 10%+ ER dump on falling short of consensus estimates, as well as a one-off tax expense in Brazil that won’t show up in subsequent quarters. Notice how we are forming a very small hidden bullish divergence on the weekly chart, but more on this later.
On the daily chart, note the series of higher lows on RSI. We are trading in a near-term expanding wedge pattern (purple trendlines) with a series of higher highs and higher lows. Note that bearish divergence formed before ER that eventually played out, as the stock dumped. Given significant accumulation around current levels, I note that there’s a support sitting around 1,571. My opinion is that MELI will likely grind lower in the coming days to retest this 1,571 level, forming a hidden bullish divergence on RSI on the daily before pushing higher.
Subsequently, MELI is likely to push towards 1,962.79, which is a weekly imbalance. This is likely to coincide with a upper trendline tap and some selling in the process.
Let’s briefly consider fundamentals as well - despite not meeting consensus estimates, their volume of payments climbed 57% to $56.5b for the quarter, and their GMV climbed 40% YoY to $13.5b. Margins have improved, and some analysts have upgraded their estimates to 2,000, which is similar to what I expect to see in the coming months.
In spite of market weakness, I expect MELI to buck the trend and push higher. We can consider its ER down move as the main “crash” event.
How about the long term?
Notice how the 1.618 Fib extension at 2,002.83 turned out to be resistance (assuming a swing low at 84.19 i.e. where the long-term trend started forming, and a swing high at 1,270 i.e. August 2020 highs). The next long-term target would be the 2.618 Fib extension sitting at 3,188.64. Will MELI get there within the next decade? If it continues to expand, perhaps to an international audience, then the sky’s the limit.
Sentiment: BUY
Summary (with Price Targets - NFA):
Broke out of bearish ascending channel and is currently trading in a near-term expanding wedge pattern. Measured move is to 1.962.79 after we retest 1,571 (prior basing level), and eventually a retest of ATHs at 2,020.
Investors can accumulate down to 1,571. If we break below this level comprehensively, then look towards 1,477.82 and the 1,386.86-1,419.27 gap for supports further down. If we head even lower, then trouble lies ahead and investors should reconsider their positions.
Alright, that’s it for this newsletter. See you in the next one!
$MercadoLibre(MELI)$ $Alibaba(BABA)$ $Wayfair(W)$ $Pinduoduo Inc.(PDD)$ $Amazon.com(AMZN)$
@TigerWire @TigerStars @TigerEvents @CaptainTiger @MillionaireTiger
Comments