Wednesday, May 05, 2010

Baidu, Inc.(BIDU) Classic Swing Trade Setup



Above is a daily chart of Baidu, Inc. (BIDU) along with its 20 day moving average and the ADX indicator in the lower pane. The formation that we see taking place right now in BIDU is a classic swing trade setup to buy that many traders look for. I will describe what the setup to buy should look like :

1- Find a strong trending stock - (ADX reading above 40 indicates strength)

2- 20 day moving average must be trending higher

3- The stock must pullback and make at least 2 consecutive lower highs  ( BIDU has made 4 consecutive lower highs)

4 - Entry is to place a buy stop right ABOVE the high of the previous day (In this case that price would be above 698.88)

5 - Protective stop would be below the low  of 689.53

Baidu, Inc has been in a very strong trend and I know many swing traders will be watching this setup tomorrow (Thursday).  We saw a similar setup take place on March 18th and April 19th. It will be interesting to see how this new trade plays out.

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