Here’s a long term trade on Baidu ($BIDU) (November 04, 2020)
BIDU
I want to talk about Baidu ( NASDAQ: BIDU ) today. You can see how this stock has kind of been squeezing here. A little move higher and then a flat top around 136.00. The stock broke out today, it’s pulling back a little bit right now.
Now, I am not looking at this as a trade I am looking at it as more of a position, right? Here’s why: First of all, the company reports earnings and they report to them, not on the 4th, they report them on November 18th. So this stock has a while that it can run before earnings come into play. But this isn’t the chart that I want to show you.
This is the chart that I want to show you. This stock has been under accumulation here. After a lot of distribution, it’s been under accumulation for over a year, you can see how this fell. And so this is a really good illustration of the 4 cycles of a chart of the way stocks trade. And that is, the stock is in accumulation here like it was here.
And then once the stock breaks out of this accumulation it’s in what you would call a markup phase; where institutions are competing with each other, retail traders are buying, everybody is buying. And then at some point, the stock enters what’s called the distribution phase. Where a lot of these folks that bought here now are selling here. And who are they selling to? Well, they are selling to the unsophisticated folks who want to get in on the action.
And so, once all of that distribution occurs then the stock starts moving lower, that’s called a markdown phase, a lot of selling, no buyers. And then finally, we get back to an accumulation phase like this. So this really how you would look at a stock, kind of from a satellite view, where are we in the cycle?
I just think it’s interesting, with Baidu ( NASDAQ: BIDU ), that as I look at this stock it looks like it’s just ready to come out of the accumulation phase and that would put it smack dab in the middle of the markup phase.
So that’s why I like this stock; I’m telling you the whole story. The fundamentals are pretty good on it too, for a Chinese stock. We all know you can’t trust anything that comes out of China when it comes to the fundamentals, but the chart knows all. Anyway, that’s my idea for Baidu ( NASDAQ: BIDU ), I hope it works for you.
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