Will Highflying Baidu’s Latest Pattern Yield Gains For Investors? Click here to view IBD's Daily Stock Analysis video now! -------------------------------------------------------------------------------- •But for now, Baidu is definitely the main player in China's Internet landscape. And it continues to grow. Sales growth has accelerated in recent quarters, with each quarter coming in larger than the prior quarter. •Earnings growth has also been strong, hitting the triple digits in each of the past two quarters. •Analysts expect those big gains to continue to roll in. They predict earnings will rise 111% this year and 55% next year. •At 40%, the company's return on equity is well above the 17% minimum often seen in market leaders. That ratio looks at how efficiently the company is using the money shareholders have invested. •Mutual funds own about 26% of its shares. We had a question from a viewer who wondered if there was an ideal percentage to look for in terms of the shares owned by funds. •There's no specific percentage of funds, but what you want to see is that the stock is on the radar screens of big investors. That's because they have the buying power to push a stock higher. •It's also positive if there are some good growth funds with investments in the stock. •In Baidu's case, the number of funds owning the stock rose last quarter, which is a plus. Chart Analysis •This weekly chart shows Baidu's big price run up during the past few years. Along the way, the stock has repeatedly found support along its 10-week moving average line as big investors stepped in and bought shares. •Baidu has now formed a three-weeks-tight pattern, which could give individual investors a chance to get on board (Point 1). Here's the first week of the pattern (Point 2). •During each of the two weeks that followed, the weekly closing price was within 1% of the prior week's closing price. So that fits the criteria for a three-weeks-tight pattern. •To find the buy point, just add 10 cents to the highest point in the pattern at 107.19 (Point 3). That makes the buy point 107.29. •Watch to see if the stock can climb past that buy point. If volume is above average when it makes that move it could offer a buying opportunity. Stock Checkup •Baidu's 97 Composite Ranking is the best in its industry group. •Its 99 EPS Rating is also No. 1 in the group. •Its 98 Relative Strength Rating is also among the group's leaders.
