With Baidu.com’s (BIDU) stellar $55 (12%) loss overnight (which is partially being recouped in today’s trading), let’s take a quick look at the weekly chart to find that the ‘damage’ so far was contained to the rising 20 week EMA, and then take a look at a detailed recent Elliott Wave count on the recent move off the late 2008 lows.

Baidu.com (BIDU) Weekly Chart:

We see that the 2008 lows near $100 per share were part of a three-phase “ABC” Corrective move – with the final move down being a horrendous drop from near $400 to $100 per share during the later half of 2008.

Price found a bottom and then has rallied all the way back to new all time highs on Monday… which were quickly erased (as if grasping at straws) overnight and into this morning’s trading day thanks to BIDU’s forward-looking earnings guidance.

What’s fascinating to me is that price opened AT the rising 20 week Exponential Moving Average, which is expected to be support in a rising trend… and so far price has bounced upwards off that level just as expected.

To be fair, a lengthy negative momentum (and – to an extent – volume divergence) has formed under price since the June indicator highs.  In powerful uptrends, price can overcome negative divergences, but eventually, these divergences are expected to ‘catch up’ with price in the long-run.

As long as price remains above the $350 level – the 20 week EMA – we can classify the intermediate term trend as up… but for a look at the daily chart along with a detailed Elliott Wave count (showing a grossly extended third wave which happens from time to time), let’s look at a chart from the new website Fibozachi.

(Click on Chart for Full-Size Image – courtesy Fibozaci.com)

Courtesy Fibozaci.com’s Technician’s Corner, I would suggest reading the entire post entitled “Baidu – Possible Top:  Long-Term Elliott Wave Count.”

What interests me most – beyond the extended third wave – is the final “Bearish Rising Wedge” or – in Elliott Terms, the “Ending Diagonal” which is a known pattern that is correlated (but never guarantees) market (or stock) tops, as indicated in the article.

Fibozachi notes that price can often be expected to ‘eject’ out of the rising wedge (or ending diagonal) 75% of the way to the apex, which is the point in which the converging trendlines meet – BIDU appears to be at that 75% line prior to today’s morning decline.

This is just another interesting, deeper level technical take on the current structure of BIDU.

Let’s keep watching to see how far this support bounce of the 20 week EMA will last and see if this indeed is the peak for prices for this powerhouse of a stock.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade