PDD Plunges 3.4% Amid Technical Downturn and Bearish Options Flow

Summary
• PDD Holdings (PDD) trades at $108.475, down 3.42% from its previous close of $112.32
• Intraday range spans $106.10 to $109.40, with volume surging to 7.53 million shares
• Options data reveals heavy put activity at $100–$102 strikes, signaling bearish sentiment
• Analysts highlight oversold RSI and bearish MACD crossover as key technical triggers

PDD’s sharp intraday decline has ignited a bearish technical narrative, with the stock breaking below critical support levels and triggering a surge in put options trading. The move aligns with a broader breakdown in momentum indicators and a divergence from sector peers like Alibaba (BABA), which rose 2.5% today. Traders are now scrutinizing Fibonacci retracement levels and options liquidity to gauge the depth of the correction.

Bearish Breakdown Below Key Support Levels
PDD’s 3.4% intraday drop reflects a confluence of technical and sentiment-driven factors. The stock broke below its 50-day moving average ($118.58) and 200-day moving average ($120.74), confirming a bearish trend. A bearish MACD crossover (0.229 vs. -0.395) and RSI near oversold territory (50.8) suggest exhausted buying pressure. Bollinger Bands contraction and Fibonacci support at $107.14 ($61.8% retracement) now act as critical psychological barriers. Options data reinforces this narrative, with the PDD20260123P100 put option (strike $100, delta -0.112) seeing 6,569 contracts traded, indicating aggressive short-term bearish positioning.

Internet Retail Sector Splits as PDD Dives Amid BABA's Gains
While PDD tumbles, Alibaba Group (BABA) rose 2.5% today, outperforming the -3.2% average for internet retail peers. This divergence highlights divergent investor sentiment: PDD faces near-term technical headwinds, while BABA benefits from e-commerce tailwinds. The sector’s 52-week high/low range (BABA: $170.54–$87.11) contrasts with PDD’s tighter $87.11–$139.41 range, underscoring BABA’s stronger relative strength. However, PDD’s low beta (0.01) suggests its move is more idiosyncratic than sector-driven.

Bearish Options and ETFs in Focus as PDD Tests Support
• 200-day MA: $120.74 (below) • RSI: 50.8 (oversold) • MACD: 0.229 (bearish) • Bollinger Bands: $104.07–$124.45 (lower band near current price)

PDD’s technical profile favors short-term bearish strategies, with key support at $107.14 and $95.33. The XLF (Financial Select Sector SPDR ETF) and XRT (Retail Select Sector SPDR ETF) offer sector exposure but lack direct PDD correlation. For leveraged options, two contracts stand out:

• PDD20260123P100 (Put, $100 strike, Jan 23 expiry):
- IV: 40.78% (moderate)
- LVR: 263.82% (high leverage)
- Delta: -0.112 (moderate sensitivity)
- Theta: -0.017 (slow decay)
- Gamma: 0.026 (responsive to price swings)
- Turnover: 6,569 (high liquidity)
- Payoff at 5% downside ($103.05): $3.05/share
- This put offers asymmetric reward for a $100–$95.33 breakdown, with high leverage amplifying gains if PDD closes below $100.

• PDD20260123P102 (Put, $102 strike, Jan 23 expiry):
- IV: 38.83% (reasonable)
- LVR: 169.01% (moderate leverage)
- Delta: -0.168 (higher sensitivity)
- Theta: -0.0087 (minimal decay)
- Gamma: 0.036 (high responsiveness)
- Turnover: 6,786 (strong liquidity)
- Payoff at 5% downside ($103.05): $1.05/share
- This contract balances leverage and liquidity, ideal for a $102–$95.33 target. Its high gamma ensures rapid premium gains if PDD accelerates lower.

If $107.14 holds, consider PDD20260123C109 (Call, $109 strike) for a counter-trend rally. Aggressive bulls may short PDD20260123C110 (Call, $110 strike) if $107.14 breaks, targeting $95.33.

Backtest PDD Holdings Stock Performance
After experiencing a -3% intraday plunge from 2022 to the present, PDD's stock exhibited a mixed short-to-medium-term performance. The backtest results indicate that while the 3-day win rate was 50.30%, the 10-day win rate was slightly higher at 53.94%. However, the 30-day win rate was the highest at 57.37%, suggesting that PDD's stock tended to recover from intraday plunges over longer periods. The maximum return during the backtest was 10.92% over 30 days, indicating that while the stock showed volatility, it also had the potential for decent gains in the aftermath of a significant drop.

Bullish Bets Fade as PDD Faces Critical Support Test
PDD’s technical breakdown and bearish options flow suggest a high probability of continued weakness until $95.33. Traders should monitor the $107.14 Fibonacci level and the PDD20260123P100/P102 put options for liquidity-driven moves. The sector leader, Alibaba (BABA), rose 2.5% today, highlighting divergent momentum. A close below $100 would validate the bearish case, while a rebound above $109.40 could signal exhaustion. Watch for $107.14 breakdown or regulatory reaction—either outcome will define the next phase of PDD’s trajectory.