Time to go long this Chinese cat. (July 17, 2012)
BIDU
I’m Dan Fitzpatrick at StockMarketMentor.com on Tuesday, July 17th. We’re looking at Baidu ( $Baidu.com, Inc. (ADR) ). Look Chinese stocks have been really just getting crushed lately, today was a bad day; so why am I looking at Baidu ( $Baidu.com, Inc. (ADR) )? Shorted, do we short it? No, time too short it was, well let’s just say not today, this is not when you want to be shorting a stock you want to be shorting it when its up at the top of the range not down at the bottom of the range. I’m talking about going long this stock, to pick a bottom, Danny don’t do that, I didn’t go to medical school I sure wouldn’t specialize in that anyway. No, this is a short term trade; here’s the thing, look at the volume here, it’s a big old mass of volume like twice average volume, over twice average volume really. So what happened during the day? Let’s look at the intraday chart here. You get a big old sell off in the morning and then a climb up throughout most of the day, just a little drift sideways towards the end, into what? A volatility squeeze, we love volatility squeezes. Why? Well because once they start squeezing they really squeeze and they pop. That’s what we really have here on Baidu ( $Baidu.com, Inc. (ADR) ). On a short term basis like intraday five minute chart we’ve got a volatility squeeze just begging for some upside release. If we go back to the daily chart though; what we have here is a long tailed cat, that’s what I call it, anyway you could call it a Dragonfly Doji, call it anything you want, you can even call it of a long handled hammer, all I know is this; intraday this thing had a big reversal after what’s been a pretty big move down so it had an intriguing reversal that allows us to define our support for this stock right under $99.00 or so, in fact let’s call it $99.00. So you’re risking and six dollars on a $105.00 stock to go long. And how long are you going to stay long, till it goes up to here? Well if only; no, all you want to do is, you want to be looking for a few bucks are three, four, maybe five bucks, if the market is strong tomorrow, that’s the key as well, if the market is strong. If the markets weak tomorrow you’re not going to get the whole lot of upside movement here you just going to get the stock kind of rolling over, but for now, for the time being, I see this is a very short term trade; I’m talking like Wednesday. Longer term? Look at the weekly chart, I mean this just looks like a missile that got shot and is basically losing trajectory now and is coming back down to earth. This looks like a top to me, but for the time being we’re trading the short term bounce to the upside, by the way; so what are we going to do with Baidu ( $Baidu.com, Inc. (ADR) ), if it winds up moving back to this area? Well, I wait for to start rolling over and that’s when I want to short it, but for the time being this is your trade right here. Okay members I’ve got a lot to talk about, in particular one area, one sector that’s really been outperforming, we’ve been on top of some of that, but we’re going to get all of it now; so get over there to the Strategy Session, take some notes I’ll see you there. Free Chart