3SOF

Nobody's stepping up, so I'll have to make my own plan!

To tell you the truth, even a profitable short makes me nervous as hell. But BIDU seems ready to break significantly lower.

IF I find it up in premarket I will cover at least half my position at open.

The remainder will be held while I watch the tape, finger on the trigger.

If it rallies sufficiently to indicate my remaining shares are about to go into the red, I will cover. If by close Monday it hasn't broken the support line, I will also cover.

I do expect an attempted rally in the AM: "amateurs set the opening price, professionals set the close."

BIDU bulls and bears continue to fight it out. I've found the stength of the rallies unconvincing, and the fundamental argument against BIDU compelling.

Alexa, a company that monitors web traffic, is currently showing a 36% decline in Baidu's traffic:

http://www.alexa.com/site/ds/movers_shakers?lang=zh_gb2312

Many explanations have been deployed for this precipitous drop. Most BIDU longs believe that Alexa is mistaken.

I believe it is the direct result of the Chinese government's anti-porn crusade. Baidu's database has a 40,000-count list of banned keywords!

http://www.venturetdf.com/china/baidu_aug9.php

As you've read in the news, Baidu has been ordered to remove mp3 links from their database. This should reduce traffic at least another 10%.

Wuth traffic reduced by 50%, Baidu's business model -- selling ads for its high-traffic web portal -- is now severely crippled.

But the market efficiency isn't there!

Baidu longs still pay ridiculous prices for the few shares in the float.

This supply-and-demand situation will change as the supply bloats (this occurs after the 180-day lockup tied to the 8/5 IPO has expired).

But I am betting that the demand will peter out before that.

Here's a daily chart (complete history) and a five-day, one-minute chart.

Does today's doji mean a turning point?

Another day, another firm initiates coverage. This time it's Credit Suisse First Boston, and (like underwriters Goldman Sachs and Piper Jaffrey), it's "underperform."

But the BIDU longs are taking it in stride, pointing to murmurs in the Chinese press that Google will buy Baidu. (I seriously doubt that, but one never knows...)

Intraday, it's lost $2 at most, only down 30 cents at this moment. However, market close usually brings a large daytrader dump. If that doesn't happen, I get out, and possibly go long -- as you can see in the intraday chart, mornings are rally-time for the hopeful.

Closed only twenty cents down! Amazing.

Got out with my skin intact. short basis was 82, covered at 80.14.

Considering that this was a high risk investment that tied up $8,000 of my limited capital for nearly a week, I'm not crazy about the gains. I will be keeping watch on BIDU, though; the stubborn longs can't deny reality forever.

I especially would like to be short before next earnings, or as soon as the media picks up Alexa's report of reduced traffic at baidu.com. Also, if Google outlines their China policy, or the expenditure of its recently-raised cash, without mention of baidu, it is time to ride BIDU down to 45 or 50.

I expect BIDU to rally pretty strongly tomorrow, maybe 3 to 5 points or even more. Still, I decided not to go long, preferring to invest in some "gulf plays" mentioned in another thread.

Another stock that looks very good right now is former 3SOF pick DESC:

http://www.3stocksonfire.org/trading/index.php?topic=1833.msg22421#msg22421

A very weak opening on Friday seduced me back into my short position on BIDU. The five-day chart below (60-minute periods) shows the bulls are losing definitively.

The remote possibility that GOOG or Rupert Murdoch will step in to buy baidu remains a scary thought, though, so I don't have as large a position this time.

BIDU has retreated to its last remaining support level. If 72 definitively breaks, there's only hope and spit to hold it up for longs.

Here's the 5-day:

Good work on bidu robt. I would have shorted that baby if i had enough money to tie up. The initial ipo was crazy then it droped. Hope not to many here went long.

Quote from: agatto2 on September 28, 2005, 06:05:41 AM
Good work on bidu robt. I would have shorted that baby if i had enough money to tie up. The initial ipo was crazy then it droped. Hope not to many here went long.

I agree.  Applause to robt, and applause to higherstocks, who nailed this one back on August 5.

Quote from: higherstocks on August 05, 2005, 05:09:22 PM
I dont like it!  Get out now!  This thing will drop like a rock!

The current price suggests a market capitalization of more than $3 billion, which is way too high, said Darren Chervitz, director of research at Jacob Asset Management in New York. Revenue is just $30 million.

The stock has plenty of risks. A fifth of its traffic comes from users downloading illegal MP3 files. The Chinese government has shut it down for violating censorship rules.

It's in free fall. last support at 72 broken just minutes after the open. It looks like this will be a profitable play for some time to come. (Famous Last Words? I hope not!)

Quote from: agatto2 on September 28, 2005, 06:05:41 AM
Good work on bidu robt. I would have shorted that baby if i had enough money to tie up. The initial ipo was crazy then it droped. Hope not to many here went long.

It's getting cheaper every hour, and still plenty of downside. I was surprised that Ameritrade had more shares available, so I added today, now have about  3400 worth (but that figure keeps going down  )

Closed at 65.71, and down further in AH.

Today was the MOST FUN I've ever had in the market and, not coincidentally, the most profitable.

For much of this morning, it looked like a green day for BIDU. No stock goes straight down, though. My long positions in KFX, DESC and HQSM all had strong pops intraday, and luckily I recently overloaded ALL THREE! I was able to take profits on this "trifecta," and still hold my original positions -- meaning total portfolio growth of 5% in a single day! Yowie!

So I was prepared to take a one-day hit from BIDU, with no pain.

As you can see in the chart at bottom, a "three identical crows" formation developed over the last three days. The fact that each candlstick is longer only adds power to this formation.

"This pattern resembles a panic selling that should cause additional downside action. Each day's close sets a benchmark for opening prices the next trading day. There is a total absence of buying power in this pattern."

Some say no confirmation is needed with this one, others say another lower close confirms.

Ever hopeful longs joined three different rallies intraday (top chart). I took the opportunity to increase my short holdings to $4000.

The downtrend narrowly won the close 71 cents to the downside. As soon as AH began, BIDU gave up another 70 cents, so it's 1.40 down as I write. Another nice profit, though coming very late in the day -- and in addition to the 5% gain mentioned above!!

BIDU is now a much more affordable short. For someone entering now, it may seem much more risky than it was at 80 or 100...but I believe there is more downside to come. Other short disagree and are exiting -- that means opportunity for those willing to add to or create a short position! I will stick with it, possibly adding more, while keeping a careful eye on the tape.

Bottom fishers showed up today, and every penny in BIDU's progress downward became a fight of tooth and nail. Still it added another negative point by close.

There is yet more downside. In fact, Monday seems likely to bring a new round of panic selling thanks to news about Google:

http://www.nytimes.com/2005/10/01/technology/01google.html

Google intends to become an ISP, offering free or low-cost broadband to all of San Francisco. This explains where their recently-raised funds are actually intended to go.

Nobody thought GOOG just raised the money for the hell of it. This is TERRIBLE news for the BIDU long whose hopes were pinned to a GOOG buyout.

This news should be good for a few points Mondy, and momentum may take it well down from there.

BIDU bulls took the day. Stock shot up about two points following the opening, then traded sideways for the rest of the day.

One factor encouraging the bulls: Alexa now shows Baidu.com's traffic back up to previous levels.

BIDU's tenacious hold on its gains are likely to result in greater strength tomorrow, so I closed half of my short position in after hours trading, at 66.23 (short basis is 74.89).

As yet undecided whether to wait for a recommence on the downtrend, or cover the lot and, perhaps, go long.

As expected, BIDU gave us a hefty gap up, opening at 68.12,ranging up to 73.25, where I attempted to short more, but no shares available. Later in the day I was able to add more short shares at 70.77, allowing me to reclaim some part of the day's loss. Closed the trade at 69.70.

I'm out of BIDU, but watching closely. Its trend of lower highs resumes as expected. Eventually, it will bid up in a morning rally providing another short opportunity. I have an alert set for my cell phone.