BIDU Update

I still like BIDU a lot a a short play to consider and I like where it is. I added some BIDU Puts in the area for the model options portfolio and filled out the BIDU Core short which is still at a profit from the original short for the equities model portfolio.

I think BIDU in this area offers an interesting risk:reward proposition as a stop can be put just a bit above the recent highs, the position could even be phased in to with a partial position here with a wide stop (fewer shares initially) which could be added to either on a head fake move or confirmation of the break below support.

Both BIDU trades we have entered (short and then long) have both been successful, they both were entered on head fake moves that reversed shortly after and both times we let the trade come to us rather than chasing it.

Here's the update:

 When BIDU formed this bearish descending triangle (consolidation/continuation pattern) technical traders would have expected BIDU to follow the green arrows as a break below the triangle according to Technical Analysis should lead to the resumption of the downtrend. While the triangle was forming we already had a good idea that it was going to be a head fake move and BIDU was likely to put in a counter-trend move to the upside, that's exactly what happened and short term long positions entered in BIDU worked very well.


 Here's a closer look at the bearish price pattern and BIDU breaking above it, this would typically tell traders that the BIDU short is over and they would see the triangle as a failed pattern, TA says to reverse your position on a failed pattern. The break above the triangle is a good area for a head fake/false breakout move and reversal. Both the first head fake and the suspected second head fake are in yellow.

 The 1 min chart since BIDU broke above the triangle's resistance. This is a leading negative divergence.

 The same with the 2 min chart-this is migration of the negative divergence through the timeframes, this is what we look for as confirmation.

 The 3 min chart in line until it broke above resistance, then it went to a leading negative position.

 The same with the 5 min chart.

 The longer 15 min chart shows virtually the same thing, but on a more important timeframe.

 Here's the head fake break down low below the bearish price pattern that would have drawn in shorts, but look at the positive divergence, the shorts adding supply to the market would allow smart money to accumulate and sell those shares in to strength, the 30 min chart seems to show exactly that as the leading negative divergence hits a new lower low.

The 60 min chart since our first "Core " short position that is still open in the orange box, this too was on a head fake breakout above a bearish price pattern, it allowed us to short price strength, but 3C weakness and gave us less risk as a stop would be above that area rather than chasing a downside break and having a much larger stop. The downtrend was confirmed until the bearish triangle and when that broke (yellow box), you can see the positive divergence, however the 60 min chart never went anywhere and remained in a leading negative divergence, which seems to indicate, even though we had this counter trend move up, the larger institutional position was still very much moving out of BIDU, this is why I think BIDU makes sense to look at in this area with a number of different entries possible.