NEW YORK (Real Money) -- The Chinese stock market has been on fire this week. Shares of Aluminum Corporation of China (ACH) are up 21%, China Telecom (CHA) is up 12.6%, Petrochina (PTR) is up 12%, online media company Sina.com (SINA) up more than 15%, Yanzhou Coal Mining (YZC) up 27%, and China Southern Airlines (ZNH) is 18% higher on the week.
These are strong moves across a broad base of sectors. The one stock that, while higher on the week, stands out as an underperformer is Baidu (BIDU), the China internet services provider. Baidu shares have underperformed the iShares FTSE China 25 Index Fund (FXI) by 26% for the year to date, and the Shanghai Stock Exchange Composite Index by 32%.
It may be time for Baidu to catch up with the group.
The weekly chart shows the strong move off the 2013 lows, followed by a period of consolidation later that year and through the first half of 2014.
Shares started to come off the channel bottom about this time last year, gaining momentum and breaking channel resistance, then rallying into year end. Another period of consolidation began, which saw a retracement to the October 2014 low and the long-term uptrend line drawn off the 2013 and 2014 lows.
The stock has compressed in a tight channel over the last two months, bounded by the October low level and the 40-week (200-day) moving average. On this timeframe, the Relative Strength Index is crossing above its centerline, the moving average convergence/divergence (MACD) is attempting a bullish crossover, and the Money Flow Index, a volume-weighted relative strength measure, is in an extremely oversold condition. This week the stock is attempting to break above the downtrend line drawn off the highs of the last five months.
The recent compression in price is more clearly defined on the daily chart, where the MACD has been in bullish divergence to price for the last month, and the Money Flow Index is tracking higher and above its centerline.
Baidu shares look like they are technically well positioned to begin a catch-up move with the broader China market. A close in upper candle range above the key intersection of the downtrend line, channel resistance, and the 200 day moving average is a long entry point. The well-defined areas of support offer clear stop-loss levels.
Editor's Note: This article was originally published at 12:42 p.m. EDT on Real Money Pro on April 9.