BIDU - The Intraday Channel

(Click on charts to enlarge, then click on them again for further enlargement. Use back arrow at the top of your screen to return to the narrative).

I got stopped out for a loss of $600 on my first buy of BIDU yesterday. As trading progressed, BIDU had a trendline validation of resistance at the top of the channel (down arrow) and TWO trendline validations of support at the bottom of the channel (up arrows).

After the second validation of support (second up arrow), BIDU formed an Ascending Triangle (pattern in yellow). I bought it again, with a stop below the last lows of the pattern: 121.45-121.46.

BIDU broke out to the upside and went into a little consolidation pattern, the little Rectangle (pattern in red). That looked very nice, preparatory to another upside breakout, and I was ahead over $1,000 on paper.

The general market was still higher on the session, but BIDU took a nosedive and fell below the little Rectangle, fell below the rising line of the Ascending Triangle AND took out my stop. Oops! I took another loss of $500 on the session and was down $1,100.

As frustrating as it is to take losses like that, it's critical to stay disciplined in these situations, and to follow what Ms. Market is telling. Don't predict what Ms. Market will do. FOLLOW what Ms. Market is doing!

What Ms. Market was doing when I was stopped out the second time, was (1)taking out the lows of the Rectangle; (2) taking out the rising trendline support of the yellow Ascending triangle, and (3) taking out 121.45-121.46 support. Is that telling us anything?

Well-ll, there never are any guarantees, but that said to me that if Ms. Market was going to take out support when those patterns were looking very nice for further upside, broken support should now act as resistance to any attempts at the upside, and that BIDU "should" head lower from the breakdown.

I shorted 121.44 and got rewarded for it. As BIDU headed lower, toward the bottom of the channel, I "bought to cover" at 120.82 for a gain of $1,500. BIDU finished the session at the bottom of the channel, which also is a fill of the gap that was left on the chart (horizontal green line).



Overall gain on the three trades: $400



For a larger perspective, I've put on the daily chart where the trendlines of current Rising Channel (pattern in blue) come in for trading on Monday, March 21.