Baidu Inc (ADR) (NASDAQ:BIDU) shares are coiled tight and ready for flight. If you’re pressed for time, consider that the headline and act accordingly. But if you want more information — and a couple of trade ideas — read on. I have plenty to say about BIDU stock, and its looming breakout.

Chinese stocks have been quite the fan favorite on Wall Street of late. Both BIDU and fellow internet giant Alibaba Group Holding Ltd (NYSE:BABA) have scored big gains this summer. But while Alibaba has spent August rallying, Baidu has been in consolidation mode.

Not that shareholders should be complaining. After July’s rocket launch the stock was due for a breather.

To get a sense of the big picture in emerging markets and China, look no further than the action in the iShares MSCI Emerging Markets Indx (ETF) (NYSEARCA:EEM) and the iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA:FXI). While both carry a high correlation, we’ll focus on EEM since it counts BIDU and BABA among its top 10 holdings.

Strength Emerging in EEM

Long-term trackers of the emerging-markets ETF know that its strength is a relatively new phenomenon. In fact, emerging markets have underperformed U.S. equities for virtually the entire post-2008 recovery. It’s only in 2017 that foreign stocks have begun to play ball.

The accompanying weekly chart includes the Comparative Relative Strength (CRS) study in the lower panel. This indicator shows how EEM has fared versus the S&P 500.

With last week’s surge, emerging markets have now climbed to a three-year high. And with the 50-week and 20-week moving averages ascending beneath the price, EEM currently boasts one of the best uptrends of any region on the planet.

This positive momentum should continue to bode well for BIDU stock.

Baidu Is “Beasting”

The weekly chart of Baidu should be the poster child for how volatility behaves in stock prices. Periods of compression inevitably give way to periods of expansion. For much of the past two years, BIDU has been locked in an ever-tightening range.

Pattern lovers know this as the symmetrical triangle. The series of higher pivot lows reflect increased buying aggression. And the series of lower pivot highs reflect increased aggression by sellers. It’s been a stalemate of sorts with neither side able to gain the upper hand.

Until last month, that is.

Propelled by better-than-expected earnings, BIDU stock finally was able to break out. Not surprisingly, high volume accompanied the departure as shorts ran for cover and uncommitted spectators finally piled in. With a proper uptrend now established, any and all bullish setups should be viewed as buying opportunities.

And that brings us to today’s trade idea.

The past four weeks of churn have created a clean high base setup on both the weekly and daily charts. As shown in the daily time frame, the past month of consolidation has allowed the 20-day moving average to catch-up. We can consider this the stock working through the overbought pressures that arose following the monster post-earnings rally.

At this point, BIDU has paused long enough and buyers need to step up. A break above $230 will signal its next ascent has begun.

Pick Your Trade on BIDU Stock

Which route you take in building a position around Baidu depends in large part on whether you want to be aggressive. Let’s consider two ways to play. First, the lower-probability but higher-potential-reward trade.

Buy the Oct $220/$240 bull call spread for $8.55. The risk is limited to $8.55, and the reward is limited to $11.45. To capture the max reward, we need BIDU to rally above $240 by expiration.

The second trade is a higher-probability but lower-potential-reward trade.

Sell the Oct $210/$200 bull put spread for $1.62. If BIDU sits above $210 at expiration, you will capture the max reward of $1.62. The max risk is limited to $8.38.

As of this writing, Tyler Craig held bullish positions in BIDU. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.