BIDU Follow Up

I started a Call position in the options model portfolio for BIDU last Friday using July $110 calls. All in all, I still like the position and intend to hold the call position. In fact I would even say the charts have improved signaling potentially a stronger trade than I first thought.

 BIDU daily, the yellow area is a head fake breakout from a large bearish triangle, this is where we shorted BIDU as one of the core short positions that are still open, in fact the BIDU short (no leverage-just a straight equity short) is at a 23+% gain.

 Shorter term I noticed this bearish price consolidation, in the last update Monday I said,

"BIDU has that same bear flag/pennant we are seeing everywhere. In the BIDU chart post from Friday I showed a chart similar to this and said,

"There's always the chance (even with BIDU moving up as I suspect) that we will see a downside break which sets up a bear trap. Recently with these price patterns the chances have been about 50/50 that there's a downside break first and then an upside breakout creating the bear trap. I'd estimate 10% of the time we see a Crazy Ivan which is a shakeout in both direction before the real move establishes itself."

That appears to be exactly what happened with BIDU, price did make the move and the 3C charts suggest it is a bear trap.

 Here's the break under the descending triangle, note the large volume on the break as many technical traders see this bearish price pattern and wait for price confirmation (a downside break) before entering.

 Here's where BIDU gets interesting. I originally looked at this a maybe a swing trade or some shorter term trade, in fact at the last update I said,

" BIDU had a positive divergence out to 15 min, it looks like a decent short term bounce or relief rally candidate, but as the positive divergences son't reach out past the 15 min chart, I don't consider it to be a longer term trade, thus the July expiration instead of August."


That has now changed as the chart above is a 30 min chart with a leading positive divergence, so it appears the trade is looking stronger than initially thought and this strength only developed once BIDU broke below the descending triangle, the area I talked about as being a potential bear trap.

 The 15 min chart continues to add to the positive divergence as BIDU is in a relatively flat range.

 The short term 3 min chart shows positive divergences increasing as BIDU pulls back near the $110.10 area.

The 2 min chart shows this same behavior, positive divergences near the lows and as price starts to move higher, a negative divergence to knock it back down where the positive divergences become even stronger.

We have a small positive divergence developing today in to the intraday decline, this is interesting because past positive divergences have been at lower prices, so BIDU is certainly worth keeping an eye on a it may be preparing to make a move higher very soon.