Baidu Stock Analysis: Locked and Loaded for a Move Toward Higher Prices

baidu stock analysis
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BIDU Stock: Indications Are Lining Up on Multiple Timeframes

The Nasdaq index has just forged a new all-time high, and given the turmoil and volatility that has plagued the market in recent weeks, this is an exceptional feat. I am not the least bit surprised. In fact, I am quite relieved because, since early February, I have been stating that I believe this sell-off was just a much-needed correction and that higher prices would eventually prevail. As a result of my bullish posturing, I have continued to focus on investments that contain bullish characteristics suggesting that they are geared for higher stock prices.

So it should come as no surprise that I am focusing on Baidu Inc (ADR) (NASDAQ:BIDU) stock because I believe that Baidu stock is poised for higher stock prices. In actuality, I have been bullish on BIDU stock since May 2017, when a number of very influential indications suggested that a bullish view was warranted.

The following Baidu stock chart illustrates the indications responsible for generating my bullish view on this investment.

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Chart courtesy of StockCharts.com

This stock chart uses a monthly scale to illustrate the price action and the momentum indicator responsible for generating my bullish view on BIDU stock.

Price Action

The price action is constructive in nature and therefore, it contains impulse waves and consolidation waves.

The impulse waves, which are highlighted in green, are advancing in nature and capture the period in a bullish trend when the stock price stages a sustained move toward higher prices.

The consolidation waves, which are highlighted in purple, are corrective in nature. As a result, they capture the period in a bullish trend when the stock price corrects and refrains from advancing. Corrective price action serves to unwind overbought conditions that were created in the impulse wave that preceded it in order to create the necessary environment where a new impulse wave can flourish.

These waves, in an alternating wave structure, are responsible for creating and sustaining a trend.

In June 2017, Baidu stock completed the consolidation wave by exiting the pattern in an upward direction, suggesting that higher prices are likely because an impulse wave is in development.

Since that consolidation wave was completed, BIDU stock jumped 46.42%. I have reason to believe that the current impulse wave is still in development because a very influential momentum indicator is supporting the notion that higher prices are still in development.

Momentum Indicator

The moving average convergence/divergence (MACD) indicator is an influential momentum indicator that uses the crossing of a signal line to determine whether bullish or bearish momentum is influencing the price action in a stock. Bullish momentum implies that a stock is likely to appreciate, while bearish momentum implies that a stock is likely to depreciate. The MACD indicator is very influential because a stock cannot sustain a move in either direction unless the applicable momentum is supporting it.

Every bullish MACD cross highlighted on the Baidu stock chart correctly indicated that BIDU stock was set to appreciate. The current MACD cross that was generated in May 2017 is still in bullish alignment, suggesting that higher prices are still in development.

Price Action and the Momentum Indicator

When I combine price action and the momentum indicator, it isn’t difficult to see that the wave structure has coincided with the MACD indicator; impulse waves have been accompanied by bullish MACD signals, while consolidation waves have been accompanied by bearish MACD signals.

I feel confident in saying that as long as the MACD indicator remains in bullish alignment, an impulse wave is in development, which translates into higher BIDU stock prices.

It also helps that the impulse wave currently in development is also constructive in nature and it is on the verge of generating coinciding indications, suggesting that higher prices are on the horizon.

These coinciding indications are highlighted on the following Baidu stock chart.

Chart courtesy of StockCharts.com

Once again, I am focusing on price action and a momentum indicator, but this time, I am using a weekly scale.

This chart focuses on the impulse wave that began in May 2016, which is currently still in development. The Baidu stock chart illustrates that the impulse wave has also been constructive in nature, and the bullish trend created by it has been supported by the MACD indicator.

The consolidation wave is approaching completion and a bullish MACD cross is on the verge of being generated. These indications, when generated, will support the notion that BIDU stock is set to appreciate.

The monthly signals remain in bullish alignment and the generation of the weekly signals will indicate that Baidu stock is bullish on multiple timeframes, which will increase the odds that an accelerated move toward higher prices is on the horizon. I would not be the least bit surprised to see BIDU stock forging new all-time highs in the weeks ahead as it challenges the $300.00 price point.

Analyst Take

I am still bullish on Baidu stock because the indications that first generated this view are still in bullish alignment. There are new indications on the verge of being generated, which would imply that BIDU stock is set to appreciate once again.