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Baidu: On the downside


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by Bernie Schaeffer, editor Schaeffer's Investment Research

Based on our three-part strategy -- which combines fundamental, technical and sentiment-based metrics -- I initiated a short position in Baidu (BIDU).

Price action for the stock has been weak, with the equity down 4 percent year-to-date and 18 percent over the past 52 weeks.

Since falling below its 200-day moving average at the end of April, BIDU has been in a down trend.

Additionally, its short-term 50-day moving average recently crossed below the 200-day moving average—typically a strong bearish signal.

Short interest, as a percentage of the stock’s float, is below 2 percent and this leaves the potential for more shorts to pile on and drive BIDU even lower.

Downgrades are a definite possibility in the future, as 14 of the 16 analysts covering BIDU have it rated as a strong buy. This could also help to drive the shares down even further.

Learn more about this financial newsletter at Bernie Schaeffer's Investment Research.

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