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NASDAQ: BIDU analysis

October 15, 2011

Here is a chart which captures my trades made in Baidu (NASDAQ: BIDU) yesterday.

The rationale for making this trade was simple:

a) Baidu is in an uptrend
b) There was an unfilled gap from last week
c) Google (NASDAQ: GOOG) reported earnings above expectations, and was widely expected to gap up.  On that event alone I was expecting the majority of stocks in QQQ, Baidu included to act strong on the open.

My plan was to buy on a pullback.

My first long entry turned out to be too soon.  Luckily I recognized the pattern of market weakness.  Sell off on the open, bounce and weak recovery.

I exited half of  my position to reduce risk.

I continued to monitor my position, looking for signs of strength, but could not ignore the signs of weakness.  When it became apparent that 136 would be challenged by the bears, I decided to cut my losses altogether.  The pullback move was unfinished.

However, my plan was unchanged.  I still wanted to buy on a pullback, but picked a support level this time.   I had previously identified 133-135 as support, but was unsure as to whether Baidu would pullback to that area.  So, I decided to look for selling exhaustion near 135.  It dipped down as low as 135.1, and when it reversed, I bought, got filled at 135.52.

At the time I made the screen capture above, I was not sure whether the Low of the Day was in or not, so I decided to place my stop at 135.  Fortune favours the bold, my stop was not hit for the rest of the day, so now I am holding a full position long over the weekend.
Going forward, I am fairly confident about my swing trade.
My stop will turn into an alert at 135, if Baidu drops below that, I will sell 1/2 of my position, and look to buy back 1/2 position at lower prices, with a new stop of 131.
1st Target for my swing trade is 139, at which point I will sell 1/2 of my position.  For the remaining half, I will attempt to time the highest price between now and when Baidu reports earnings (Oct27).

From → signal

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