Jumia's Stock Found A New Bottom: What's Next?

On May 6, Citron's Andrew Left appeared on Benzinga’s “Premarket Prep At The Close” to discuss why he’s bullish on Jumia Technologies AG JMIA.

Nicknamed “the Amazon Inc AMZN of Africa,” Left noted Jumia has first-mover advantage on the continent and listed three main reasons why he believes the online marketplace and technology company has huge growth potential:

• Scale: Jumia’s ability to grow its market share in more African countries easily because it doesn’t have any competition.
• Brand: Jumia is the most recognized retailer in Nigeria and the fourth most respected technology company in Africa.
• Valuation: Jumia’s market cap is $2 billion which Left believes is low.

An Acquisition Target: Left suspects Jumia could be bought by a larger U.S.-based company after speaking to former employees.

Jumia is trading down over 60% from its Feb. 10 all-time high of $69.89, but after finding a new bottom on May 11 at $13.90, has rebounded over 50%.

EXCLUSIVE: Jumia's Co-CEO Talks African E-Commerce Platform's Growth Trajectory With 'PreMarket Prep'

The Jumia Chart: Jumia’s stock has been in a downtrend since reaching its new all-time high and has made fairly consistent lower highs and lower lows over the past three months. On Wednesday, Jumia was trading just under a resistance level at $27.22 and was being supported by the eight-day exponential moving average (EMA) on the daily chart.

Jumia regained support of the eight-day EMA when it crossed above the downward sloping trendline that has been holding it down since Feb. 10.

Jumia is trading below both the 21-day EMA and the 200-day simple moving average, which indicates the sentiment in the stock is currently bearish. The eight-day EMA is currently trending below the 21-day EMA, which is not what bulls want to see. If Jumia can gain the $27.22 area as support, however, that would pop it up over the 21-day EMA which would bring the eight-day EMA up closer to crossing back above the 21-day EMA.

Bulls want to see Jumia regain the $27 area on bullish volume for continuation. If Jumia’s stock can regain that level as support, it has room to move up towards $33.75. Bulls would like to see a continuation above that level in order to make a higher high and break the downtrend.

Bears want to see Jumia’s stock fall back down toward the downward sloping trendline. If Jumia was unable to hold the trendline as support, it could revisit the $18 area. A loss of that support level could cause Jumia to retest $12.96.

JMIA Price Action: Jumia was trading down 4% at $26.44 at last check.

A man with a Jumia delivery. Courtesy photo.