Baidu Inc. (BIDU - Get Report) has been on the rise since the stock traded as low as $153.78 on Jan. 3. At Wednesday's close of $171.18, the stock is 11.3% above this low and trading between its monthly value level at $163.56 and this week's risky level at $177.91, which is my recommended buy zone for the stock. If the Chinese Internet search giant breaks to the upside, my annual risky level is my target at $242.91.
Baidu is up 7.9% so far in 2019, but is in bear market territory, 39.8% below its May 16, 2018 intraday high of $284.22, so my target projects that the stock will not see a new high this year. Looking at the daily and weekly charts below, you will see the stock below a "death cross" since Aug. 27, but above its 50-day simple moving average at $167.87, which is within my buy zone. The weekly chart will be upgraded to positive, if Friday's close is above its five-week modified moving average at $170.80.
Baidu reports quarterly results after the closing bell on Thursday, Feb. 21, and analysts expect the company to earn between $1.79 and $1.85 per share. We know that Chinese economic growth has been slowing over the past year or so. If the stock market rallies on positive trade negotiations between the U.S. and China, Baidu should benefit. The Chinese leading search engine has a significant short-sale interest so short-covering could be a factor to drive the stock higher post-earnings. Keep in mind that the company has reported better-than-expected earnings-per-share in 11 consecutive quarters. While Alphabet (GOOGL - Get Report) is the leader in search in the western world, Baidu garners 80% of web searches in China.
The Daily Chart for Baidu
Courtesy of MetaStock Xenith
The daily chart for Baidu shows that the stock has been below a "death cross" since Aug. 27 when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices lie ahead. The stock closed at $228.61 on Aug. 27 and did not bottom until $153.78 was tested on Jan. 3. The stock closed at $158.60 on Dec. 31, which was the input to my proprietary analytics. This resulted in my semiannual value level at $147.80. The higher two horizontals at the upper part of the chart are my annual and quarterly risky levels at $241.91 and $245.67, respectively. The Jan. 31 close of $172.63 resulted in my monthly value level at $163.56, which is the low end of my buy zone. My weekly risky level at $177.91 is the upper end of my buy zone. The 50-day and 200-day SMAs are $167.89 and $212.50, respectively.
The Weekly Chart for Baidu
Courtesy of MetaStock Xenith
The weekly chart for Baidu will be upgraded to positive if the stock ends this week above its five-week modified moving average of $171.06. The stock is below its 200-week simple moving average or "reversion to the mean" at $197.02, last tested during the week of Nov. 2 when the average was $200.30. The 12x3x3 weekly slow stochastic reading is projected to rise to 34.81 this week up from 32.58 on Feb. 15.
Trading Strategy: Buy weakness between my monthly value level at $163.56 and my weekly risky level at $177.91 and reduce holdings on strength to my annual and quarterly risky levels at $242.91 and $245.67, respectively. More aggressive sell levels are the 200-week and 200-day simple moving averages at $197.02 and $212.50, respectively.