BIDU Stock: A Resolution Is Long Overdue
That moment of truth is finally upon us, and it seems as though that ever elusive breakout on the Baidu Inc (ADR) (NASDAQ:BIDU) stock chart has finally arrived. These are definitely exciting times, to say the least, especially if this is the breakout in BIDU stock I have long been awaiting. The implications of such a feat would equate to a tremendously bullish outcome.
At this juncture, I would have to say that Baidu stock is on top of my list of attractive investments, because this could be the beginning of a very large run-up in the stock price.
If you’re a stranger to my publications, it’s worth noting that my views on a potential investment are generated on my abilities to analyze the company’s stock chart. This method of investment analysis is known as technical analysis, and it uses historical price and volume data to discern the predominant trend, which is then used to forecast the future potential of the investment in question.
The technical price pattern on the BIDU stock chart below is a symmetrical triangle. It is a very special and extremely powerful price pattern, and it is the exact reason why I am so excited about the prospect of BIDU stock.
The following Baidu stock chart illustrates the technical price pattern that was just completed.
Chart courtesy of StockCharts.com
Symmetrical triangles are created by using two converging trend lines. The upper trend line acts as resistance while the lower trend line acts as support. These trend lines capture the pattern’s quintessential characteristic, which is lower highs and higher lows.
This quintessential characteristic creates a dynamic in which momentum is being stored in the pattern as bears and bulls fight for dominance. The battle between these two camps causes the range between resistance and support to compress. The battle is finally won when either support or resistance is finally broken and a victor is finally crowned. The loser turns tail and exits their respective position. The resolution of this price pattern results in the release of the momentum that was built and stored within it.
This stored momentum is why symmetrical triangles are particularly powerful patterns. This one was just completed as the Baidu stock price exited it in an upward direction by breaking above resistance. This suggests that the next directional move is to the upside. Based on the size and duration of this pattern, a sizable move is now expected.
The following Baidu stock chart illustrates that this symmetrical triangle is just a part of a larger bullish trend.
Chart courtesy of StockCharts.com
The price chart above illustrates a bullish trend that contains constructive price action. Constructive price action is a necessary ingredient in a sustainable trend. This sustainable bullish trend began in 2009, after the conclusion of the financial crisis and, after a brief pause, it is set to appreciate once again.
Sustainable trends contain two distinct waves: an impulse wave and a consolidation wave. These waves are what constitutes constructive price action. The impulse wave is where the stock price advances in very short order, and the consolidation wave is where any overbought conditions are unwound and—more importantly—the setup for the next impulse wave is established.
This alternating wave structure has supported BIDU stock from the lows at $10.05 established in 2009. The symmetrical triangle that was just completed was a consolidation wave that now serves to suggest that a new impulse wave is set to develop. The preceding impulse waves have all gone on to create new all-time highs in Baidu stock, and there is little reason to believe that this impulse wave will be any different.
As a guide, I can use the preceding impulse wave to project the next potential price objective. This objective is obtained by assuming that the consolidation wave is acting as a midpoint between the two waves. Applying this method to the price chart above creates a potential price objective of $300.00.
The moving average convergence/divergence (MACD) indicator in the lower panel is reaffirming the bullish view that is being suggested by the completed price pattern. MACD is a trend-following momentum indicator that is used to define whether the momentum propelling an investment is either bullish or bearish.
This indicator has had an impeccable track record of confirming the type of wave that is set to develop. In the past, whenever a bullish MACD cross was generated, it confirmed that an impulse wave was set to develop. Whenever a bearish MACD cross was generated, it confirmed that a consolidation was set to develop.
The current bullish MACD cross is suggesting that bullish momentum is now governing Baidu shares, and it is also suggesting that a new impulse wave is now set to develop. The moment of truth is now upon us, and I am expecting a surge to the upside in price to begin at once.
Bottom Line on Baidu Stock
Baidu stock has finally completed a technical pattern that is implying that a higher stock price is very likely. This bullish view is being supported by a multitude of indicators and, as a result, I am extremely bullish on the prospects of BIDU stock going forward.