BIDU: Head & Shoulders Top

The breakout of four bullish patterns on Tuesday resulted in a rally yesterday morning of nearly three points, to 125.09, which was very impressive given that the general market was down hard again. The session high was again below the gap (see next chart). Although BIDU remained in the green for most of the morning, it finally succumbed to downward pressure as the market took another beating yesterday.

In this 10-Minute chart, we can see that a Head & Shoulders Top formed and that The Bears were able to break it to the downside, sending BIDU to a session low of 119.41, five and a half points below the session high, so score one for The Bears.

The Bulls staged another rally of nearly three points and managed to put BIDU back into positive territory on the session and were able to take the stock back above the broken neckline twice, but the Bears ultimately were able to defend and were able to smack BIDU out of there (the two yellow arrows). Score another one for the Bears.

The downside target for the H&S Top is roughly 118.80, which is the height of the pattern, subtracted from the neckline break. The Bears got most of that yesterday, at the 119.41 low.

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. You would "Buy To Cover" the short position and take profits at or near the 118.80 target, so taking at least "some" profits on the selloff to 119.41 would have been a real nice play.

Let's look again at the Hourly Chart.




The Bears not only want the 118.80 target to get MADE, they very much want to break the Ascending Triangle (pattern in white) to the downside by breaking that rising trendline and, particularly, by taking out the 118.00 low at Green #2.

The Bulls want to turn the "possible" Symmetrical Triangle (pattern in green) into an upside breakout. They've got some room between yesterday's close of 120.56 and the rising trendline of the White Ascending Triangle, so they can afford to allow The Bears their 118.80-ish target, but they need to hold that trendline. That comes in today at 118.986, basis the daily chart. If BIDU heads down there and that trendline gets broken by just a little bit in order for that target to get MADE, that's alright as long as The Bulls take control right there, and reverse the stock higher.