So far this year, China-based software concern Baidu (BIDU) twice conquered the $159 area – its highest level in more than 12 months – with the most recent trip up the charts taking place in late March. Following that peak, however, BIDU turned in five-straight losses, and was last seen on track for its sixth. Though the shares now sport a fractional year-over-year deficit, traders shouldn’t fret just yet, as they’re now trading near a trendline with historically bullish implications.
Specifically, Baidu stock is within one standard deviation of its 50-day moving average. According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, the security saw five similar signals over the last three years, and was higher one month later 60% of the time with an average 8.3% gain. A comparable move from its current perch would place the equity just shy of $156.
Short-term options traders have been overwhelmingly bearish, indicating a shift in sentiment could boost the shares. This is per BIDU’s Schaeffer’s put/call open interest ratio (SOIR) of 0.73, which stands in the 83rd percentile of annual readings.
It’s also worth noting that premiums are attractively priced at the moment, making this an opportune time to bet on the stock’s next moves with options. In fact, Baidu stock’s Schaeffer’s Volatility Index (SVI) of 48% stands at the low 9th percentile of readings from the last 12 months.
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