BIDU: Patterns, Patterns, Patterns

(Click on charts to enlarge. Click on them again for further enlargement. Use left back arrow to return to narrative).

BIDU has sold off nearly 25% since its April top. Most recently, it broke down from a Bear Flag, but notice that in February/March, the resolution of that "Bear" Flag was to the upside. These patterns aren't always bearish.



BIDU had a bit of a rough start yesterday morning, but then staged a sharp rally, to White Data Point #1. At White Data Point #4, the stock had formed a Falling Wedge near the EMA's (exponential moving averages), which had turned up. That looked like a nice setup for a continuation of the countertrend rally, so I got long for a trade to the prior high of 123.60, sold there and called it a day.



The Falling Wedge (in yellow in this chart) turned out to be the Left Shoulder of a H&S Top. After that pattern broke down, BIDU retested the neckline and got slightly above it into the EMA's, which had turned down, and failed (white arrow). Both the breakdown and the failed retest were nice entries for selling short.




Quite a few patterns (and trading opportunities) formed over the entire session after the H&S Top breakdown. I should have stuck around ;)

1. Bear Flag (pattern in red) - There were two failed retests of that breakdown (red arrows).

2. Another Bear Flag (pattern in orange) - There were two validations of resistance at the top of the flag (orange arrows), prior to the breakdown.

3. Bull Flag (pattern in purple) - that was a Right Shoulder of an Inverse H&S pattern.

4. Inverse H&S (pattern in white) - both the Bull Flag and the Inverse H&S broke out to the upside, but the latter was a Fakeout Breakout (white arrow). When a H&S pattern breaks out, we don't want to see the low of the Right Shoulder (horizontal yellow line) get taken out (the opposite, if it's a top). That usually spells trouble, but not always.

In this particular case, the Right Shoulder low got taken out, then the breakdown was confirmed by a failed retest (yellow arrow). Uh-oh. Down she went.

Not only were there a lot of patterns in the intraday chart, but there were quite a few validations of resistance, and validations of the breakdowns. Those kinds of confirmations present nice trading opportunities. If we're not out gardening ;)



Gain: $1,200.