Chinese internet stocks have been and continue to offer juicy opportunities for active traders and those looking to follow trends. Given their recent bullish price action, most of those stocks now require a closer look again as actionable trades are waiting in the wings.
Front and center in the Chinese internet stock space is Baidu (BIDU), the Beijing-based internet giant. It’s easy to see why trades like BIDU are popular if we consider its respect for various technical indicators, plenty of volatility, news flow and an average daily trading volume of more than 2.6 million shares. Although the stock had a rough start to 2013, sliding more than 15 percent in the first four months of the year, it came back with a vengeance in the second half, particularly with its steep incline in July.
On the long-term chart, the BIDU stock rally has brought the stock back towards its all-time highs, which were first seen in August 2011. With momentum indicators such as the slow stochastics coiling up to spring higher and the stock having consolidated just below the August 2011 lows for the past several weeks, Baidu looks to have plenty of room to move higher in the medium term.
On the daily chart, BIDU stock has support from its 50-day simple moving average (yellow), and a series of bullish engulfing and hammer candles over the past two months. All of this is pushing BIDU right up at the upper end of the recent trading range, which stands a good chance of breaking to new all-time highs soon.
And BIDU stock is hardly alone. Just look at the performance of other Chinese internet stocks…
Sohu.com (SOHU) just pushed past a multi-month resistance point last week. SOHU stock continues to look better, particularly if it can overcome its 50-day moving average (yellow line), currently near $72.10.
And thirdly, internet television company Youku Tudou Inc (YOKU), which is currently consolidating/coiling-up below a multi-month resistance line, has given the bulls plenty of bullish price action lately. YOKU stock’s strength is confirmed by bullish candlestick patterns that should allow for a push to new highs soon.
BIDU stock, SOHU stock, and YOKU stock all look good for higher highs in coming weeks. However, this doesn’t mean you should completely drop risk management in favor or risk chasing. As always, traders must respect the possibility of bearish reversals.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.