In his morning missive on Real Money Thursday, Jim Cramer weighed in on three cannabis names he likes and as well as several Chinese stocks. Baidu (BIDU) is one Chinese stock he favors on a pullback. Let's take a look at the charts and indicators from the comfort of our home office and skip the 20-hour flight to meet with management and really check on the fundamentals.
In the daily bar chart of BIDU, below, we can see that the price chart of BIDU started to weaken from the middle of May. Prices continued lower until late December/early January but prices have not recovered much the past two months. The technical indicators are not encouraging at this point in time. Prices managed to hold above the declining 50-day moving average line a few weeks but slipped back below the line in recent days. The slope of the slower-to-react 200-day moving average line has had a bearish slope since early August and prices would need to rally about $50 now to test this indicator.
The volume data is not encouraging and the daily On-Balance-Volume (OBV) line has been in a decline from May. The only way the OBV line maintains a downtrend is if the volume of trading is heavier on days when the price of BIDU closes lower. More volume on a down day is a sign of aggressive selling.
The trend-following Moving Average Convergence Divergence (MACD) oscillator briefly moved above the zero line earlier this month but it has since slipped back below for a new sell signal.
In the weekly bar chart of BIDU, below, we can see that prices made a "round trip" from the $160 area in 2016 and early 2017 up to the $270 area and back down again. Prices are below the declining 40-week moving average line so the math says we are in a bearish trend.
The weekly OBV line shows a decline from early 2018 and it is still pointed down. The weekly MACD oscillator is far below the zero line but it crossed to the upside in January for a cover shorts buy signal. A buy signal looks to be far, far off in the future.
In this Point and Figure chart of BIDU, below, we can see the pattern of lower highs and lower lows. This chart is currently projecting a $154.18 price target or a retest of the $153.96 low. A rally to $176.97 is needed for an upside breakout.
Bottom-line strategy: You may want to put BIDU on your shopping list but wait for stronger signs of accumulation (buying).