bidu tight weekly closes (图)

Will Baidu's Pattern Help Or Hinder Its Prospects? By Christina Wise, Investor's Business Daily Posted 06/18/2010 12:56 PM ET Featured Stocks BIDU Baidu Inc Ads (Added 06/14/2010) * Top-Rated Company Today we're going to talk about a stock some of you may be familiar with: Baidu (BIDU). It's scored some big gains in recent years. The company runs China's leading search engine. In fact it's sometimes referred to as the Chinese Google. Ironically, a May 28 International Leaders column noted the company has benefited from Google's decision to shift its China operations from the mainland to Hong Kong, where its search engine won't be censored. Analysts estimate that in the first month after Google's exit, it lost about 35% of its traffic to Baidu. -------------------------------------------------------------------------------- Baidu Benefited From Google’s China Move, But Will It Resume Its Climb? Click here to view IBD's Daily Stock Analysis video now! Will Baidu's Pattern Help Or Hinder Its Prospects? View Enlarged Image -------------------------------------------------------------------------------- •Baidu's earnings growth has been solid for some time. And last quarter earnings jumped a hefty 133%. •Meanwhile, sales growth came in at 60%. •Analysts see that growth continuing. They expect earnings to rise 87% in 2010 and 55% in 2011. •The firm's three-to-five year earnings growth rate is 97%, which is strong. •Baidu's return on equity is 40%, well above the 17% minimum typically seen in big winners. •Baidu spends 9.5% of its sales on research. It's positive to see a company reinvest in developing new products. But R&D spending varies across industries. So when you're looking at a firm's R&D spending, compare it to others in its industry group. We did that for Baidu and found its R&D spending level is about average for the industry. Chart Analysis •Baidu's stock split 10-for-1 May 12. That's a big split and sometimes excessive stock splits can signal the end of a winning stock's price run. •So far Baidu seems to be holding its ground. It's had a series of tight weekly closes. That tight trading is positive because it shows big investors aren't rushing for the door. In fact they're quietly buying, which prevents the stock from having big swings. •It had a few days of wild moves around the time its stock split (Point 1), but it's calmed down and now appears to be forming an irregular double-bottom base. •A classic double-bottom base looks like the letter "W". And the right leg in the "W" should undercut the left leg. In Baidu's pattern, the right leg (Point 2) doesn't undercut the left leg (Point 3), so it's not a normal double-bottom base. •Just the same, if you're eyeing it as an investment candidate, its buy point would be calculated by adding 10 cents to the peak in the center of the "W" at 77.97 (Point 4). That gives us a buy point of 78.07. Watch to see if the stock can break out past that buy point on heavy volume. Stock Checkup •The stock earns some great scores in Stock Checkup. It's Composite Rating, EPS Rating, Relative Strength Rating and SMR Rating are all the best in its Internet — Content industry group. •Its Accumulation/Distribution Rating is the second highest in the group. •It gets a lot of green lights in the Stock Checklist, showing it passes in those categories. •But its industry group is only ranked No. 190 out of the 197 IBD tracks. So that gets a red light.