On April 27, 2013, we wrote a short piece on Baidu (BIDU) that concluded with the following remark:
“The conservative downside target of $93.43 has been achieved and we are now sitting at the extreme downside target of $54.79. All indications, based on the SRL, are that Baidu is worth considering in a two stage purchase plan, once at the current level and again at $67 or lower.”
The chart that we included for the above assessment was based on the work of Edson Gould’s Speed Resistance Lines (SRL) and is shown below.
Since that recommendation to buy at $85, Baidu had increased to as high as $251. What was not included at the time was the upside targets based on the work of Edson Gould. At that time, the upside targets were:
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$140.16 (conservative target)
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$210.23 (mid target)
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$280.31 (extreme target)
Baidu was able to achieve two of the three upside targets that were indicated for the stock based on the interpretation of Gould’s work. With the Chinese stock market experiencing significant turmoil, Baidu has declined from the $251 level to the current price of $144 making a review of the technicals useful.
Baidu Downside Targets
Below is the updated Speed Resistance Lines based on the work of Edson Gould:
Already Baidu has declined below the conservative downside target of $167.59 and has managed to fall to the mid-range downside target of $125.79. If we were to base this analysis on the previous indications of 2013, we’d say that the stock price for BIDU should reach the extreme downside target before investments should be entered into.
As the situation in China does not appear to be trending higher in the near term, we believe that falling to $125 is in the cards for Baidu. When and if Baidu falls to $125, we will re-examine the investment prospects based on Gould’s work.