BIDU: The Bulls vs. The Bears

(Click On Charts To Enlarge, then click on them again for further enlargement. Use left arrow at the top of your screen to return to the narrative)

From yesterday morning's post:

"For trading purposes, the breakdown of the H&S Top OR the rally back to the broken neckline in the low 122.00's was an excellent place to short BIDU. The stop loss on the trade would be a move above the Right Shoulder of the pattern, which is where you would "Buy To Cover" your short position, and take a loss."

They stuck it to The Bears at the open, sending BIDU back above the neckline (horizontal yellow line) of the H&S Top, AND one penny above the high of the Right Shoulder, which was 123.08. The early morning high was 123.09! That's called a "stop buster" when a stop is taken out only nominally, meaning by a penny or three. Bears who shorted Wednesday's breakdown of the neckline, or who shorted the two failed retests of that neckline late Wednesday afternoon had a problem on their hands. Do they cover their short position on that "nominal" (in name only) print of 123.09, above the high of the Right Shoulder, or do they hope that BIDU goes down and fills the gap from Wednesday's close?

That's an individual call on the part of each trader. In this particular case, The Bears did get a selloff from that 123.09 high, but the gap wasn't filled completely, and BIDU was back in their faces, as we will see in the following 1-minute chart.



After the selloff toward the gap, BIDU went into consolidation mode, forming a Symmetrical Triangle (pattern in white). Notice the white down arrow. When BIDU sold off from there, that was a trendline validation, meaning that Ms. Market was telling us, "Yes, that IS resistance." BIDU wasn't able to rally up thru that trendline at that point.

When a validated trendline does get taken out, that usually has "some" significance. After BIDU sold off to White #4, completing the bottom of the Symmetrical Triangle, it took out that upper trendline then went into another little triangle formation (the one in yellow).

At the yellow down arrows, there were a couple/few trendline validations. Ms. Market again was telling us, "Yes, that IS resistance." When the triangle in yellow broke out, that was a second Bullish pattern breakout and we can see that it did have "some" significance. BIDU got a nice little pop to the upside.

I had purchased it for 122.25 during the white Symmetrical Triangle formation and I "sold into strength" at 123.80 after the yellow Symmetrical Triangle broke out. Glad that I did. The session high of 123.95 came in about a minute after I sold, and BIDU traded with a downward bias for the remainder of the session, closing at 121.64, below my 122.25 entry.



Gain: $1,550.



BIDU has been a nice trading stock. While it's had some tradeable moves both up and down since the 112.95 low several weeks ago, it essentially has "traded sideways." It hasn't broken down along with most of the general market, but it hasn't regained the gap (horizontal red line) and moved higher, either.

It's the proverbial "Bull vs. Bear" struggle, with BIDU currently parked in the "Neutral Zone," below the gap, but above the lower trendline of the white Ascending Triangle.