Baidu Inc (NASDAQ 🙂 CEO Robin Li Yanhong already suggested in March that the trade war with the US has no meaningful impact on the Chinese internet search engine.
Seven weeks later, on May 17, the share fell 16.5 percent, despite solid growth of 21% in the first quarter. Investors sold it specifically because of the trade war. Baidu gets its revenue from advertisements and March marked a full year since the start of the trade, reducing the company's customers' advertising.
On Monday we had Caterpillar Inc & # 39; s ( NYSE 🙂 ,, our favorite among the 25 companies listed on the CNBC China Trade Index. We believe that Baidu had the greatest upside potential of that group, although we wanted more evidence earlier in the week that the stock had been released. The graph below provides additional clarity about where the company's shares go.
Baidu Daily Chart
The 16.5% dive on 17 May caused a falling escape gap, as it fell below the long-term trend line since January 2009. After that fateful day, investors deepen the jump by a further 26%, until August 15, with $ 93.39 down. A $ 58.96 fall in the closing price on May 16 from $ 153.70. All in all, the price was reduced by 38.46%.
However, the company has been steadily increasing since then with $ 30.04 or 32.17%. Is it low point? Not yet, but it can be close.
Since mid-May 2018, the stock has been struggling to free a falling channel. The 200 DMA follows the channel top and now provides resistance, making yesterday's candle a doji, among the highlights of November 7. It is likely to fall back below the high of July 1, above which the price has not escaped since.
The 50 DMA rises to the 200 DMA, to a possible golden cross, on positive trade sentiment. Investors are likely to wait to see how the wind is blowing in the back and forth trade talk and whether they can lead to an actual agreement between the two most powerful economies in the world. A close above $ 130 would suggest that the road is paved to the next major resistance, the $ 160 area – the congestion before the fall.
Trading Strategies
Conservative traders must wait before taking a long position for a closing of more than $ 135, with a return movement demonstrating support above the November-December range.
Moderate traders can be satisfied with a transaction of more than $ 130 and a withdrawal for better access, not proof of demand.
Aggressive traders can enter into a contraire trade, relying on the quadruple resistance: July 1 high, November 8 high, the 200 DMA and the doji. The proximity of resistance offers an attractive risk-return ratio.
Trade sample
Input: $ 125 Stop-loss: $ 128 (above November 8 high) Risk: $ 3 Target: $ 116 (above the range below) Reward: $ 9 Risk: Reward ratio: 1: 3
