Shares of Baidu, Inc. (NASDAQ:BIDU) bounced back today following a steep decline over the last few days.  Last Thursday, the stock hit a new all time high of $650.00.  At this range, the stock had a expensive P/E of over 100.  In addition, the even number of $650.00 can be looked at as big resistance.  After the markets closed, Google Inc. (NASDAQ:GOOG) reported earnings.  Google began to drop sharply as analysts estimates were beaten but considering the recent run up in their stock price, it was just not quite good enough.  Once Google began to fall, BIDU followed in sympathy.  This was the start of the two day correction on BIDU.

BIDU fell sharply on Friday as Google was punished.  In addition, the markets took a steep hit on the back of Goldman Sachs being charged with civil fraud.  As BIDU tumbled, more ran for the exit, carrying the sell off into Monday in the stock.  While the markets bounced back on Monday, BIDU hit a low of $602.20.  At this point, it was coming into the $600 even number support after almost falling $50 in two days.

Just a side note, remember the even numbers work as support and resistance.

Today, Tuesday, April 20th, BIDU is bouncing solidly off the $600 level.  It is trading up about 2.25% as it is back to the $627.00 range.  The next step is to closely watch the consolidation in the next few days.  That will alert you as to whether or not it is a bear pattern or bullish pattern.  The stock remains somewhat expensive even after the pullback and as a Chief Market Strategist, I would have to look for a move lower in the near term after this bounce.

Gareth Soloway
Chief Market Strategist