This post originally appeared on TraderPlanet.com.
Trying to catch a stock when it changes trend is a tough game to play, but if you are able to time it just right, that can be when you get the biggest move.
Way back in October of last year I noted that the $FXI looked like it had bottomed and was getting ready to break out. Since then it has gone up roughly 20% and shows no signs of slowing down.
When you get a macro move like this, one that you think will last for a long time, the first thing you want to do from a trader’s perspective is look for stocks that might benefit from that move. Sometimes you will find stocks that are first movers, going lock step up with the macro move. But you also want to look at stocks that may be changing their trend in relation to that macro move and haven’t broken out yet, but are setting up nicely.
That is where I think $BIDU is right now.
$BIDU has been in a large down channel for almost a year; however it is now consolidating in the upper range of that channel just below the trendline which corresponds to the 200 day moving average (ma).
Moves that correspond with a breakout above more than one resistance factor, in this case the downtrend line and 200ma, are often more explosive and last longer than other moves.
On a breakout with good volume above the $113.50 you would look to get long BIDU with your first target level being around $134.50, which corresponds to the previous channel high. If you put a stop in at $107.50 you are setting up a 1:3.5 risk to reward trade; or even better if you choose a tighter stop.
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