Baidu (BIDU) is the dominant internet search engine company in China and its stock price was under selling pressure until Wednesday. Prices rebounded Wednesday some 39% on news of a pledge of market support from Beijing. Let's check out the charts to see if actions speak louder than words.
In this daily bar chart of BIDU, below, we can see that prices have been in a decline the past 12 months. BIDU gapped higher Wednesday and rallied to the underside of the declining 50-day moving average line. The slower-to-react 200-day moving average line also has a negative slope. The trading volume did expand recently but on this scale on this chart (below) it does not register as really meaningful, in my opinion. Prices are retreating so far on Thursday.
The On-Balance-Volume (OBV) line shows a long decline as traders have been more aggressive sellers. The Moving Average Convergence Divergence (MACD) oscillator is bearish but may signal a cover shorts buy message before long.
In this weekly Japanese candlestick chart of BIDU, below, we see a mixed picture. The two most recent candles represent a large bullish engulfing pattern. We do not have bullish confirmation of this reversal pattern so let's not jump the gun. Prices are still trading below the declining 40-week moving average line.
The weekly OBV line did not make a new low when prices made a new low for the move down - this is a bullish divergence. The MACD oscillator is bearish.
In this daily Point and Figure chart of BIDU, below, we can see a potential upside price target of $243.
In this second Point and Figure chart of BIDU, below, we used weekly price data. Here the software projects the $37 area as a target.
Bottom line strategy: There are some moving parts here - what are Chinese regulators going to do and will the Chinese economy slow, among others. I don't know the answers but the charts do not yet suggest that this is a good time and place to go long BIDU. Standing aside for now.
