Bye, Bye Bidu?? (by Leaf_West)

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Dion 90 x 122 One of the last Go-Go tech stocks that hasn't really sold off yet is Baidu Inc (BIDU).  Here are some interesting charts on BIDU …


BIDU_March18, 2011_Daily

Baidu's daily chart sure looks bear-flag like.  The other thing that I like about the chart is the fact that price sliced through the 20EMA in late February and then tested the 50EMA.  While the first test of the 50EMA was a quick rejection, price was not really able to get back above the 20EMA on a sustainable basis.

When I have seen price action like this in the past with other stocks, typically price will head back for the 2nd test of the 50EMA.  That is the point of truth … if price rejects the 50EMA and bounces quickly you are likely to see price try harder to get back above the 20EMA.

If price fails to bounce, price is liable to slice through the 50EMA right away or hug it for a couple of candles before giving way to test lower levels.

Note how the RSI(14) has broken below its bear-flag structure.

BIDU_March18, 2011_Daily01

As mentioned, BIDU has done well against the market over the last 3 weeks or so.  Question is whether or not the momentum in the out performance is petering out.

BIDU_March18, 2011_Daily02

Bear-flag patterns are often ABC corrective moves …. the chart above shows the potential targets for this potential pattern.  Note how the corrective target actually takes price right into the previous larger wave's 4th wave.  This fits perfectly with EWT rules/guidelines.


BIDU_March18, 2011_Daily03

Weak volume on corrective waves usually give way to selling pressure as buying interest dries up at higher and higher prices.


BIDU_March18, 2011_Daily04

The 60-minute chart above shows how the last couple of days have produced red/down candles all with upper legs.  Sellers are winning the battle over buyers.  That is shown as well with the sloping directional movement indicator.

I have $119.41 has my audio alert on BIDU in watching for a possible short on Monday.  If it does trigger short, then the $100 round number support would fit right into that ABC pattern drawn above.

Cheers … Leaf_West

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