Mercadolibre Plummets 3.6%: What's Behind the Sudden Selloff?

Summary
• Mercadolibre (MELI) trades at $2,383.63, down 3.61% intraday
• Intraday range: $2,366.58 (low) to $2,438.78 (high)
• 52-week high of $2,645.22 and low of $1,646 highlight volatility

Mercadolibre’s sharp selloff has sent shockwaves through the e-commerce sector, with the stock trading below its 200-day moving average. Analysts point to valuation pressures, intensifying competition, and institutional selling as key drivers. The stock’s 3.61% decline has pushed it closer to critical support levels, raising questions about its long-term sustainability.

Valuation Pressures and Competitive Threats Spark Sell-Off
Mercadolibre’s intraday plunge stems from a confluence of valuation concerns and intensifying competition. A P/E ratio of 59.41, significantly above the sector average, has drawn investor skepticism about the sustainability of its growth model. Q2 results revealed contracting operating margins and aggressive credit expansion, while Amazon’s expanding logistics network and Sea Limited’s Shopee platform erode MELI’s market share. Analysts warn that MELI’s reliance on subsidies and high-risk lending exposes it to regional volatility, particularly in Brazil and Argentina, where currency fluctuations and inflationary pressures are compounding risks.

Internet Retail Sector Under Pressure as Amazon Slides 1.5%
The Internet Retail sector is grappling with headwinds as Amazon (AMZN) declines 1.5% intraday, reflecting broader investor caution. MELI’s 3.61% drop mirrors the sector’s struggles, with Sea Limited (SE) and eBay (EBAY) also underperforming. Amazon’s dominance in cloud and advertising provides a buffer, but MELI’s geographic concentration and fintech risks make it more vulnerable. The sector’s 1.47% daily loss underscores a shift in sentiment toward more diversified players.

Navigating Volatility: Technicals and Options Playbook
• 200-day MA: $2,163.00 (below current price)
• RSI: 72.29 (overbought)
• MACD: 13.56 (bullish divergence)
• Bollinger Bands: Upper at $2,476.02, Middle at $2,373.74

Mercadolibre’s technicals suggest a short-term bearish bias despite a long-term bullish trend. Key support levels at $2,373.74 (middle Bollinger Band) and $2,271.45 (lower Bollinger Band) are critical to monitor. The 200-day MA at $2,163.00 could act as a final floor. With the stock trading near overbought territory (RSI: 72.29), a pullback is likely. The options chain reveals two contracts with high leverage ratios but low liquidity:

• MELI20251003C2400 (Call, $2,400 strike, 2025-10-03):
- IV: 0.17% (extremely low)
- Delta: 0.0122 (deep out-of-the-money)
- Theta: -0.0391 (moderate time decay)
- Gamma: 0.0268 (low sensitivity)
- Turnover: 0
- Leverage: 477,690% (artificially inflated due to low strike price)
- Payoff (5% downside): $0 (strike above current price)
- Why it stands out: High leverage ratio, but negligible liquidity and IV make it unsuitable for active trading.

• MELI20251010C2400 (Call, $2,400 strike, 2025-10-10):
- IV: 0.05% (extremely low)
- Delta: 0.0325 (deep out-of-the-money)
- Theta: -0.0845 (higher time decay)
- Gamma: 0.1844 (moderate sensitivity)
- Turnover: 0
- Leverage: 477,690% (artificially inflated)
- Payoff (5% downside): $0 (strike above current price)
- Why it stands out: Slightly higher gamma and theta, but still lacks liquidity and IV. Both contracts are unsuitable for active trading due to zero turnover and negligible IV. Aggressive bulls may consider a short-term bearish play with a stop-loss above $2,476.02 (upper Bollinger Band) or a long-term bullish setup if $2,163.00 (200-day MA) holds.

Backtest Mercadolibre Stock Performance

Act Now: Watch $2,373.74 Support and Sector Leadership Shifts
Mercadolibre’s selloff reflects broader sector jitters and valuation concerns, but technicals hint at a potential rebound if key support levels hold. The 200-day MA at $2,163.00 and middle Bollinger Band at $2,373.74 are critical to monitor. With Amazon (AMZN) declining 1.5% and MELI’s P/E premium under pressure, investors should prioritize liquidity and avoid illiquid options. A break below $2,373.74 could trigger further selling, while a rebound above $2,476.02 (upper Bollinger Band) may signal short-term relief. Watch for $2,373.74 breakdown or regulatory reaction.