Looking for a falling knife to catch? Check out Baidu (BIDU). (May 20, 2019)
BIDU
I want to look at Baidu ( NASDAQ: BIDU ) today. Why? Well, there are a couple of reasons. First of all, it is probably going to setup for a nice oversold bounce here. I don’t know if it is going to be tomorrow. If we thought that was going to be the case on Friday it wouldn’t have been a really good idea to buy today. We can’t buy when we think it’s time to buy, we have to buy when the stock TELLS us it’s time to buy.
So what’s going on here with Baidu ( NASDAQ: BIDU )? The stock is way down; down big, not as much as Tesla ( NASDAQ: TSLA ), but hey, Baidu ( NASDAQ: BIDU ) has got a little more going for it than Tesla ( NASDAQ: TSLA ). Here’s the deal, this is two standard deviations on the Bollinger Bands. If we go three, three standard deviations, even at three the stock is down more than three standard deviations below the 20-day moving average. Guys, that’s like it’s against the law, it’s almost an impeachable offense.
This has happened two days in a row. It happened on Friday here, it fell below, and then here; these Bollinger Bands are pretty far extended. Now, they can be extended more, they have been extended more but this is a pretty deep thing here. Look, this stock is not going to zero and what you want to do is, we want to set up here for an oversold bounce.
So what I like to do, after the market when I am seeing stuff like this, I will look at where the closing print was and that is at 117.55 here, right? So then what we will do is, I will set an alert, 117.55, I will do it for a week, I will turning this off tomorrow, every 5-minutes. This is what I want; I want to know when this stock gets above 117.55. If it does that is when I am going to consider buying this stock with, say, like a 1 percent stop, 1.5 percent stop.
This is basically a falling knife that we are looking to buy. But the fact that most of the volume happened on Friday and then today is still big volume but less than on Friday, this is kind of a big deal. We are seeing this exhaustion here. We are seeing this exhaustion and looking for some kind of reversal and when it happens there should be good money to be made on this. It could be tomorrow.
Again, I am looking at 117.55. I am kind of doing micro trading now, it’s after hours, it’s all theoretical stuff. Tomorrow morning it could be a totally different thing. But the idea is, the maximum power of the sellers and the maximum power of the buyers pushed the stock to 117.55. It has been falling, which means that sellers have been way move aggressive than buyers. When that dynamic switches and sellers are less aggressive than buyers nobody is going to send out a tweet, we are going to see it in the stock chart. We are going to see the stock not going down anymore and starting to go up. When we see that, that’s when we buy.
And guess what? We’re not the only ones looking at this. This is a very, very common, very common trading tactic. That’s a good thing because we don’t want to be the only ones doing this trade. We just want to be some of first ones doing this trade. Look at this because this could very well turn out to be a nice move tomorrow. On the other hand, it could also be the kind of thing where tomorrow stabilizes and the next day the stock trades higher. We have actually seen some of that lately over the past month or so.
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