Baidu Stock Pulls Back: Technical Levels To Watch

Baidu Inc. BIDU shares lost ground Thursday amid tensions between China and major western countries over human rights concerns. Could this be weiging on the market?

Baidu Daily Chart Analysis: The stock looks to be forming what technical traders may call a “head and shoulders” pattern.

A head and shoulders pattern is considered to be a bearish reversal pattern, although it may not act in that manner.

The pattern occurs when the stock runs up and makes a high, consolidates and goes on to make a new high, falls and bounces near support before rising towards the initial high and eventually sells off below the initial support.

The stock has shown support previously near the $220 level, which it has struggled to cross below. This is a key area on the chart, possibly confirming the head and shoulders pattern.

Although the stock may be forming a head and shoulders pattern, it is trading above the 200-day moving average (blue), indicating the sentiment of the stock still hints at being bullish.

This is a potential area where the stock may find support in the future.

Bulls would like to see the stock break above the potential resistance line that the pattern brings about. This could invalidate the pattern and cause the stock to start moving upward above support.

Bears would like to see the stock close below the $220 level and have a period of consolidation. This may cause the stock to see a further stronger move to the downward side. This move may bring price down to near the 200-day moving average before it is able to find support again.

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