Upgraded Baidu Stock Rallies Into Familiar Resistance

Short-term BIDU options are relatively cheap at the moment

May 11, 2018 at 11:57 AM
facebook X logo linkedin

Chinese internet stock Baidu Inc (NASDAQ:BIDU) was upgraded to "market perform" from "underperform" and saw its price target hiked to $305 from $240 at Bernstein. The brokerage firm projected 20% growth for the company following a recent string of divestitures -- including the sale of its food delivery firm to Alibaba's (BABA) Ele.me -- and the successful U.S. trading launch of iQIYI (IQ), of which BIDU owns a majority stake.

After coming within a chip-shot of its Oct. 17 record high of $274.97 earlier, BIDU stock was last seen up 0.3% at $269.43, bringing its week-to-date gain to 7.1% and its 2018 return to 14.6%. This positive price action just echoes the equity's recent trend, with Baidu gaining 26% from its early April lows. However, the $269-$272 region has served as staunch resistance since that mid-October peak.

bidu stock chart may 11

In the options pits, meanwhile, it's rarely been a better time to buy premium on Baidu shares. The stock's Schaeffer's Volatility Index (SVI) of 28% ranks in the 16th annual percentile, indicating low volatility expectations are being priced into short-term options.

Plus, the stock has consistently rewarded premium buyers over the past year. Specifically, its Schaeffer's Volatility Scorecard (SVS) reading is docked at an elevated 93 out of a possible 100, meaning BIDU has tended to make bigger moves over the last 12 months than what the options market was expecting.

Those who may be hesitant initiating a bullish trade on a stock that's trading near familiar resistance could consider long call spread. By selling to open one leg of this modestly bullish spread, a trader can lower their cost of entry and breakeven point -- though, they also give up the unlimited profit potential of buying a call outright.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI