BIDU Update

BIDU was a position opened on Friday using July $110 Calls. Here's the last update from Wednesday 

In that update I pointed out,  


"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."


Here's the set up in BIDU (which is also a core short position at a 22% gain). Let me just add that the market is HIGHLY correlated right now; remember the "Rising tide lifts all boats" analogy? It is more alive now than it has been in years, what that means is that most stocks are going to move with the market, it is even more important now that we find the stocks that not only have high probabilities and a good risk profile, but THEY MUST COME TO US. This is the entire reason my BIDU equity short is doing so well, we stalked that trade.

 On the daily, the yellow box is the head fake move in BIDU we expected and where we built our primary trend short position in BIDU. Then BIDU headed down, formed a bearish descending triangle which is a consolidation/continuation pattern, which means traders are waiting for it to confirm by breaking down below the triangle, this is where we see the bear traps.

 That's what happened here, look at the volume surge as shorts jump in the trade on price confirmation, you can also see them covering to the right as price moves back above the former support/resistance area. From Friday's original post,

""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 has happened.

 The local 3 min BIDU chart shows a positive divergence in to yesterday's lows as well as an overall positive divergence where the shorts were coming in, it's perfect, the shorts provide the supply and the cheap prices that smart money needs to accumulate.

 The 5 min chart is pretty much in line, seeing a negative divergence today on intraday trade.

 You can see the negative divergence today here, it's actually leading negative. I'm going to hold the calls though, even though it' likely we see some downside from these levels.


 This is why, the 15 min chart is in leading positive position, this is the longer term trend. Also note the positive divergence in to the break below the triangle.

 The 30 min BIDU chart even shows a little positive divergence, so I'll be patient with the Calls.

 Longer term as for the primary, core shorts, you can see where and why we shorted BIDU on a bull trap head fake move.

The daily chart shows the primary trend as being in big trouble, so I'm holding the equity shorts as well, but nothing goes straight up or down in the market.

As for what I'd like to see, a break out above $116 which is also the Trend Channel stop for a shorter term trending trade, it will also be around the apex of the triangle and more shorts will start to cover above that level. That's what I'm looking for. If BIDU can really move, I may add to my core short there.