BIDU Stock: Waiting for a Number of Technical Signals
The first quarter of 2018 was one I would rather not repeat, because the market action was tenuous. Wild swings coincided with extreme levels of volatility, and as a result, weaker markets prevailed. The good news is that the volatility has subsided and earnings season is now in full effect.
If the markets are going to stage a move toward higher prices, good earnings are going to be the catalyst. Thus far, I have to say that a number of companies have reported exceptional headline numbers, which has caused their stock price to surge.
I am focusing on Baidu Inc (ADR) (NASDAQ:BIDU) stock because it just reported earnings that beat estimates on both the top and bottom lines. This positive event caused Baidu stock prices to appreciate by 6.43% on the day.
I would love to say that this is a prequel of good things to come, but I am still waiting on a number technical signals that will confirm the notion that BIDU stock is set to appreciate further.
These technical signals I am waiting for are highlighted on the following Baidu stock chart.
Chart courtesy of StockCharts.com
This BIDU stock chart illustrates that the stock price has been trapped within the confines of a sloppy trading range. Price resistance currently resides at $270.00, while price support currently resides at $215.00. These respective levels of price resistance and price support are highlighted using two parallel trend lines.
In order to break free from this trading range, Baidu stock needs to break above price resistance. Such an event would imply that higher BIDU stock prices are likely to follow, which would also coincide with a bullish signal generated by the moving average convergence/divergence (MACD) indicator.
MACD is an indicator that distinguishes whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is geared toward higher prices, while bearish momentum implies that a stock is geared toward lower prices.
The MACD indicator is very influential because a stock cannot sustain a move in either direction unless the applicable momentum is supporting it.
The entire time the trading range has been in development, the MACD indicator has been in bearish alignment, implying that the BIDU stock price is geared toward lower prices, which is why it has refrained from advancing.
There were a couple of attempts at negating the bearish implications suggested by the bearish MACD signal, but both attempts have been averted. In order to suggest that a move toward higher prices is in progress, a bullish MACD cross is needed. Currently, the MACD signal lines are converging and a bullish signal is once again a possibility.
The good news is that in the context of the predominant trend, the technical indications continue to support a bullish outcome.
These technical indications are highlighted on the following Baidu stock chart.
Chart courtesy of StockCharts.com
This Baidu stock chart highlights a bullish trend that was created using an alternating wave structure consisting of impulse waves and consolidation waves.
The impulse waves are advancing in nature, and they capture the period in a bullish trend when the stock price stages a sustained move toward higher prices.
The consolidation waves are corrective in nature, and they capture the period in a bullish trend when the stock price corrects and refrains from advancing.
These waves work together in order to create and sustain a trend consisting of a series of higher highs an higher lows, which is the quintessential characteristic that defines all bullish trends.
The MACD indicator has an impeccable track record of confirming what type of wave is in development. Every bullish MACD signal has coincided with the development of an impulse wave, while a bearish MACD signal has coincided with the development of a consolidation wave.
A bullish MACD cross was generated in June 2017, implying that an impulse wave is in development. As long as this signal remains in bullish alignment, I have to believe that higher prices will prevail, which supports the notion that the trading range BIDU stock is currently trapped in will resolve itself by breaking above resistance.
I am watching a number of technical indications on the Baidu stock chart because I believe they will indicate when another move toward higher BIDU stock prices is in development. I believe that a break above price resistance and a bullish MACD cross will confirm this notion.