Stock of the Day: Baidu — Will Buyer's Remorse Turn Support Into Resistance?

There are only a few guarantees in the stock market. One is that it is always trending. It is either going up, down, or sideways. Another guarantee is that sooner or later the trend will change.

Shares of Baidu may have broken their recent downtrend. They may be about to form a new uptrend. That's why Baidu, Inc. BIDU is our Stock of the Day.

When a stock is headed lower the bears are in charge. They have more shares to sell than the bulls have to buy. So, to find someone to buy their stock, the bears have to force the price down. This makes the shares trend lower.

When the price gets low enough, new buyers will become interested and enter the market.

At this point, the price stops heading lower. The stock either trades sideways or starts to move higher. This action is illustrated on a chart when the stock crosses or ‘breaks' the downtrend line.

This could be an early indication that the tide is about to turn. The bulls may be about to take over.

When a stock is trending higher, the bulls have more shares to buy than the bears have to sell. As a result, they need to push the price higher to draw sellers off of the sidelines. This creates a new uptrend and it may be about to happen with Baidu, Inc.

If it does, there is a good chance it runs into resistance and pauses at or reverse off of the $95.00 level.

As you can see on the chart, this important price level was support for Baidu in late April and early June. And sometimes levels that were previously support can turn into resistance. This is due to buyer's remorse.

Many of the people who bought their shares while the stock was at this support now regret doing so because they have a losing position. A number of these remorseful buyers decide to eventually get out at breakeven if they can.

They don't want to hold the shares, but they don't want to lose money either.

As a result, if the shares rally back up to $95.00, they will be placing sell orders. If there is a large enough concentration of these orders it will cause resistance to form at the level that had previously been support.

Stocks are always trending. Eventually, this trend will change and trading profits will follow. This could happen with Baidu.

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