I did short the stock on Monday at 180.75 per my newsletter mention.. Nonetheless, based on the fact that the stock did not follow through to the downside yesterday, after the spike down seen on Monday, and did close in the green yesterday. If the stock gets above yesterday's high at 173.94 and gets enough follow through to break a very minor resistance now found at 174.89, I will take a fast profit on the trade.
Keep in mind that I am a "trader" and if I can see on the charts that the stock is going to move from Point A and Point B and I can take advantage of that, I will.
The stock should have seen follow through yesterday and dropped down to the $167-$168 level where a bounce would have been expected. I was ready to take profits yesterday at that price. Nonetheless, since no follow through was seen and the stock closed in the green, it likely means the traders will try to take the stock back up to the 181.00 level where I would again look to go short. A break above 174.89 should cause the stock to move back up to the 181.00 level.
By the way, being short the stock going into earnings does not worry me. First of all, the chart suggests the probabilities have increased that the stock will go down in price (rather than up). Granted, stocks move on fundamental news and earnings is fundamental news that trumps charts. By the same token, charts usually show how the traders feel about what the stock is going to do taking into consideration that earnings is coming. Big traders usually have better information than any of us and I trust what they show me on the charts more than my own "personal" evaluation of the fundamentals.
In addition, I use diversification in my portfolio (6-10 stocks at all times), meaning that some earnings will help and some will not. It all comes out in the wash in the long run. Keep in mind that the stock has moved $40 since the last earnings. A good report could be factored in already.
BIDU extended the rally this week with the 7th new all-time high weekly close in a row. Nonetheless, like last week the bulls were unable to make a convincing statement that further upside will be seen as the stock did generate a key reversal on Thursday having made a new all-time intra-week high at 185.50 and then closing on the lows of the day below the previous day’s low. There was no follow through to the reversal on Friday and the stock did close on the highs of the day, suggesting the first course of action for the week will be to the upside above Friday’s high 180.22. Nonetheless, such action could end up becoming the needed retest of the all-time high at 185.50 and a signal that a top has been found. Resistance will be found at the previous high at 181.25, which is likely to be seen on Monday and possibly a good place to consider adding shorts. Indicative support is now found at Thursday’s low at 175.30 that if broken after Friday’s high is broken would become a sell signal. Probabilities favor some strength on Monday, followed by weakness and a red close next Friday.
Sales of BIDU above 181.00 and using a stop loss at 185.75 and having an objective of $150 would offer a 6-1 risk/reward ratio. My rating on the trade is a 3 (on a scale of 1-5 with 5 being the highest).