BIDU Stock: Indications Support the Notion of Higher Stock Prices
I am focusing on Baidu Inc (ADR) (NASDAQ: BIDU) stock because I have the inclination to believe that stock is once again setting up to make a move in the direction of higher Baidu stock prices.
It actually brings me great joy returning to this name, because Baidu stock happens to be one of my favorite stocks. The reason I like it has absolutely nothing to do with the company’s fundamentals or lines of business; instead, it has everything to do with the BIDU stock chart.
For those who have not frequented my works before, let me quickly explain that my admiration for a company’s stock chart stems from the fact that I use stock charts in order to generate views on an investment. This method of investment analysis is called technical analysis, and this has been my method of choice for nearly two decades. I can attest that, when this method is applied appropriately, the result are simply outstanding, and they cannot be dismissed.
I had been watching this stock for quite some time, and my admiration for this investment was created by its price action, which has been constructive in nature. My admiration is being compounded by the fact that BIDU stock is particularly obedient to indicators.
These factors I speak of are illustrated on the following monthly-scale stock chart.
Chart courtesy of StockCharts.com
This stock chart illustrates a constructive and obedient bullish trend that has been in development since 2009.
Constructive price action consists of an alternating wave structure which contains impulse waves and consolidation waves.
The impulse waves, which are highlighted in green, are advancing in nature. These waves 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. These waves capture the period in a bullish trend when the stock price refrains from advancing. This wave serves to alleviate any overbought conditions that were created in the impulse wave that preceded it in order to create the necessary conditions so that a new impulse wave can develop.
These waves are dependent on one another and, in an alternating wave structure, they create the necessary building blocks which create and sustain a trend. What makes Baidu so impressive is that this wave structure has defined its bullish trend for nine years, and there is little to suggest that this will change anytime soon.
Baidu stock’s obedience can be illustrated using the moving average convergence/divergence (MACD) indicator. MACD is a trend-following momentum indicator that distinguishes whether bullish or bearish momentum is influencing the price action in a stock.
Bullish momentum creates a path of least resistance toward higher prices, while bearish momentum creates a path toward lower prices. A sustained move in either direction cannot occur without the applicable momentum.
The MACD indicator has an impeccable track record of confirming which constructive wave is in development on the Baidu price chart. A bullish MACD indicator has correctly suggested that an impulse wave was in development, while a bearish MACD cross has correctly suggested that a consolidation wave was in development.
In May 2017, a bullish MACD cross was generated and, in June 2017, the stock price exited the consolidation wave, implying that an impulse wave was in development.
The MACD indicator is currently in bullish alignment and, given the fact that the previous two impulse waves have gone on to form substantial new highs, I have reason to believe that this time will not be any different, and that higher Baidu stock prices will prevail.
My inclination for higher stock prices is being reinforced by the price action and indications on the following weekly-scale BIDU stock chart.
Chart courtesy of StockCharts.com
This stock chart, using a weekly scale, illustrates that the impulse waves currently in development are also constructive in nature.
2018 has started off in the right direction, as higher stock prices have prevailed. The completion of the consolidation wave is currently suggesting that an impulse wave is in development. Therefore, it is only a matter of time before new all-time highs are being forged.
The notion of higher stock prices suggested by the impulse wave will be confirmed when a bullish MACD cross is generated. The signal lines that create this indication are currently converging, and a bullish MACD cross is likely to occur in the coming weeks.
The indications that were generated on the weekly stock chart support the bullish implications that were suggested by the indications generated on the monthly stock chart. As a result, I feel confident in suggesting that it is only a matter of time before BIDU stock is forging new all-time highs and challenging the $300.00 price point.
I continue to hold a bullish view on Baidu stock. This bullish view was generated using technical analysis, which means it was based on the price action and indications that were generated on the BIDU stock chart. So, as a result, I will maintain a bullish view until there are indications suggesting that another view is warranted.