4 Candles and a Cross Say Short Baidu

Japanese Candlestick trading techniques have been powerful tools for centuries. Using those tools and a very basic western rule the chart of Baidu, $BIDU, is screaming at you to short the stock. Let me explain. The chart below shows the price action for $BIDU over the last six months. The 4 important Candles are the last 4. The doji with a long upper shadow in June 6th was a Shooting Star Doji, gapping above the previous two rising candles that looked to be reversing a bottoming action. The Shooting Star signals a potential exhaustion to the upside as the price action falls back significantly to close the day. It generally needs to be confirmed by a lower close the following day to signal a reversal. This was followed by a second Shooting Star Doji gapping higher again. It was

confirmed the following day by a Hammer, another potential reversal candle, that closed below the Shooting Star Doji close. The Hammer reversal also needs confirmation and it found it Monday with along red candle closing below the Hammer close. Three potential reversal candles and two confirmations, these four candles signal a sell. This says nothing about how far it goes. That is for other techniques. Not convinced? Then let’s bring out the Western rule. Today printed a bearish cross of the 50 day Simple Moving Average (SMA) down through the 200 day SMA. This Cross, known as the Death Cross, is a sell signal for many. And Death Cross certainly sounds bearish right?

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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