Baozun Stock Paints a Bleak Technical Picture

There's a lot of optimism surrounding BZUN to be unwound

Just yesterday, Jefferies trimmed its price target on Chinese e-commerce company Baozun Inc (NASDAQ:BZUN) to $36.60 from $39. And although BZUN is up 2.6% to trade at $25.93 today, the stock's technical picture is currently worth digging in to.

In the last week, Baozun stock has seen new resistance emerge at its -20% year-to-date level after ceding its year-to-date breakeven level earlier this month. As the shares form a wedge flag breakdown pattern and with their 14-day Relative Strength Index (RSI) at a tame 37,a rebound from last week's lows might not sustainable. With all these technical hurdles in place, slipping to the $20 level --double the stock's initial public offering (IPO) level -- is a feasible possibility.

There's also a lot of optimism surrounding the equity that could unwind and add further pressure. Only two analysts are covering BZUN, but they both rate the stock a "strong buy," and their average 12-month price target sits all the way up at $35.08, a 38.4% premium to its current perch. And although short interest fell off by 1.2% in the most recent reporting period, 31.6% of BZUN's total available float is sold short, indicating bears are firmly in control.

In the options pits, at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Baozun stock sports a 50-day call/put volume ratio of 4.6, which indicates calls outnumber puts by a more than four-to-one ratio in the last two months.