MELI Plunges 4.4%: What's Behind the Sudden Sell-Off?

Summary
• Mercadolibre (MELI) slumps 4.42% to $1,985.295, its lowest since October 2024
• Intraday range spans $1,976.51 to $2,107.9999, signaling sharp volatility
• 52-week high of $2,645.22 now 32% above current price

Today’s dramatic selloff in Mercadolibre has sent shockwaves through the Latin American e-commerce sector. The stock’s 4.42% drop—its steepest decline in over a year—has left investors scrambling to decipher the catalyst. With the stock trading near its 52-week low and technical indicators flashing bearish signals, the question looms: is this a buying opportunity or a warning shot?

Shelf Filing and Intensified Brazil Competition Trigger Sell-Off
The selloff coincided with Mercadolibre’s new shelf filing, which raised concerns about potential capital-raising moves to fund aggressive expansion in Brazil. Simultaneously, the company’s Q3 earnings report revealed margin pressures from free shipping discounts and heightened competition from Amazon and PDD’s Temu. While revenue grew 39% YoY, the 1.6% earnings miss highlighted structural challenges in maintaining profitability amid price wars. Analysts at Wedbush noted the “initial deleverage” strategy could weigh on margins for the foreseeable future, triggering profit-taking and short-covering.

Internet Retail Sector Volatile as Amazon Gains 0.38%
The broader Internet Retail sector remains mixed, with Amazon (AMZN) rising 0.38% despite Mercadolibre’s collapse. While MELI’s Brazil-focused strategy faces unique headwinds from local rivals, the sector’s top performer—Amazon—continues to benefit from global e-commerce tailwinds. However, MELI’s 4.42% drop outpaces the sector’s average 1.2% decline, underscoring its vulnerability to regional competition and margin compression.

Bearish Technicals and Options Playbook: How to Position for MELI's Volatility
• MACD: -49.94 (bearish divergence), RSI: 14.52 (oversold), Bollinger Bands: $1,951.13 (lower band near support)
• 200D MA: $2,275.28 (price 13% below), 30D MA: $2,159.80 (key resistance ahead)

Technical indicators confirm a short-term bearish bias, with MELI trading near its 52-week low and RSI signaling oversold conditions. The stock is testing the lower Bollinger Band at $1,951.13, a critical level for near-term support. While the 200-day MA remains a distant hurdle, the 30-day MA at $2,159.80 could trigger a rebound if buyers step in.

Top Options Contracts:
• MELI20270617C2110 (Call): Strike $2,110, Expiry 2027-06-17, IV 0.06%, Delta 0.0096, Theta -0.0014, Gamma 0.0168, Turnover 0
• MELI20270617C2110 (Put): Strike $2,110, Expiry 2027-06-17, IV 0.06%, Delta 0.0096, Theta -0.0014, Gamma 0.0168, Turnover 0

Both contracts exhibit extreme leverage (394,698%) but zero turnover, rendering them illiquid. The high gamma (0.0168) suggests sensitivity to price swings, but the near-zero delta and theta make them unsuitable for short-term plays. Traders should focus on cash-secured puts or short-term straddles instead.

Action Plan: Aggressive bulls may consider MELI20270617C2110 if the stock breaks above $2,159.80 (30D MA). For bearish bets, a short strangle near $1,950-$2,100 could capitalize on the 4.42% drop’s momentum.

Backtest Mercadolibre Stock Performance
I attempted to run the event-driven back-test exactly as requested (MELI, 2022-01-01→2025-11-20, enter on days when the intraday low is ≥ 4 % below the prior close). The price series was downloaded and the event dates were correctly identified, but the “event_backtest_engine” encountered an internal error (NameError: convert_statistics not defined) and stopped before producing results.To move forward you have two options:1. Retry with the same engine once the service issue is resolved (I can queue another attempt as soon as it is available).2. Use an alternative approach that we can execute immediately: • Treat each −4 % plunge day as an “entry” signal. • Apply a fixed holding-period exit rule (e.g., sell after 5 trading days) or another rule you prefer (e.g., stop-loss / take-profit). • Run a strategy_backtest_engine, which is functioning normally, to calculate the P&L, hit-rate, max drawdown, etc.Please let me know which path you’d like to take (retry the dedicated event engine or proceed with the alternative fixed-rule strategy back-test—and, if so, specify your desired exit rule).

Act Now: MELI at Pivotal Crossroads—What Traders Must Watch
Mercadolibre’s 4.42% plunge has exposed its vulnerability to margin pressures and regional competition. While the stock’s oversold RSI (14.52) hints at potential rebounds, the 200-day MA remains a distant target. Investors should monitor the $1,951.13 support level and Amazon’s 0.38% gain for sector cues. A breakdown below $1,950 could trigger a 10% extension to $1,800, while a rebound above $2,159.80 may attract short-term buyers. Watch for $1,950 breakdown or regulatory reaction—this is MELI’s most critical juncture in 2025.