Nasdaq 100 component Baidu, Inc. (BIDU) reports earnings after Monday’s closing bell, with Wall Street analysts expecting the company to report earnings per share (EPS) of $3.98 in the first quarter of 2020 revenues of $21.94 billion. The stock fell to a two-month low, despite beating top and bottom line fourth quarter estimates in February, with the actors of the market, unloading shares because of fears about the growth of coronavirus in the event of a pandemic and its impact on the Chinese business outlook.
Mainland china has sprung back to life after the pandemic stop, giving a much-needed lift to the China stocks trade on U.S. exchanges, but the continuation of trade tension between the major powers, should keep a lid on gains in the months ahead, Even if local goods and services that do not rely on the flow of international trade could gain substantial field, offering a timely profit for the American investors and traders.
Baidu fits perfectly in this category, with the Alphabet Inc.’s (GOOGLE) Google’s search engine, e-mail, and other services are now blocked by the Chinese government. However, Baidu is not a monopoly, because the other local search engines in competition for eyeballs with the big giant technology, but they may not match to the company of the enormous footprint. Similarly, these companies are competing for limited advertising revenue during a time of crisis, which could spring back to life, at any time.
BIDU’s Long-Term Chart (2005 – 2020)
The creation of the public company on the U.S. stock markets in August 2005, the opening at $6.60 and peaking at $15.40 a day later. The declining trend in the subsequent posted an all-time low of $4.44 in February 2006, paving the way for a sustained recovery that has made a round trip in the state of the high in June 2007. Immediately breakout posted healthy gains in November 2007, raised to $42.42 and turned tail, sculpture of a sell-off that accelerated during the economic collapse of 2008.
The December 2008 low at $10.05 a historic buying opportunity, before a bounce that has reached the record level of 2007 to the end of 2009. An escape in the new decade sparked buying interest, lifting above $155 in July 2001, even before the most high in November 2014 and May 2018. The upward trend ended at a high of about $285 at the time, leaving room for a double top breakdown and downward trend, registered a decrease of bottom in March 2020, when the stock may have hit bottom less than a point below the 2013 low.
The monthly stochastic oscillator crossed a long sell-cycle of March and shows no sign of crossing as we move through the second quarter. In turn, it predicts that the stock has not made much progress to the upside in the coming months, perhaps setting the stage for a recovery in the depth low. However, a holding is also possible with this configuration, which is logical given the high chances for a second pandemic wave in the autumn and winter.
BIDU Short-Term Chart (2017 – 2020)
The October 2017 reversal marked the first step of a test in the 2014 high, with the bears finally winning the battle in August 2018. The balance volume (OBV), the accumulation-distribution indicator that indicates steady selling pressure in August 2019, followed by a second analysis at this level in March 2020. Both the price and the volume have barely budged off the bottom since this time, producing dead action that reflects high levels of caution.
The stock has carved a bull pattern flag below the 50 days exponential moving average (EMA) of the resistance since the beginning of April, with a buy-the-news reaction after the earnings have the potential to trigger a breakout, which reached a strong resistance to the closely-aligned on 200-day EMA and .618 retracement level of Fibonacci from 2008 to 2018, the upward trend near $115. Short-term gains above this barrier can be difficult because of downward pressure on the long-term sell cycle.
The Bottom Line
Baidu reports earnings after Monday’s close, with the bulls holding a benefit by reason of the optimism about the end of these bans, but adverse long-term cycles may limit the gains through the third quarter of the year 2020.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.