The enthusiasm stemming from the abrupt end of China’s zero-Covid policy lasted for just over three months. Despite the tangible signs of economic improvement, Chinese equities have declined notably from their respective early-2023 peaks. Tencent is down by 22% since late-January. Alibaba, despite its widely-approved plan to split into six separate companies, has lost a third of its market value in the last three and a half months. But today, we’re going to examine Baidu after its own recent 25% drop.
Baidu is also known as “the Google of China”, due to its near-monopoly position in the Chinese online search market. However, its market value of $42B is over 30 times lower than that of its famous US counterpart. Fortunately for the bulls, the Elliott Wave chart below suggests that the stock might soon erase at least some of Google’s lead.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!
The 2h chart of Baidu reveals that the recovery from $73.58 to $160.88 is a five-wave impulse pattern. It is marked 1-2-3-4-5 in wave (1/A), where the five sub-waves of both wave 3 and wave (i) of 3 are also visible. According the theory, a three-wave retracement follows every impulse. Here, we have an A-B-C flat correction to $115.74 so far in what should be wave (2/B).
Once a correction is over, the preceding trend resumes. This means we can expect Baidu stock to head north again soon. Even if it turns out that wave (2/B) is still in progress, the overall outlook remains bullish as long as $73.58 holds. On the other hand, initial targets above $161 and probably towards the $200 mark would be up for grabs once wave (3/C) begins. Not to mention that at a forward P/E below 13, Baidu looks like an actual bargain.
In our Elliott Wave PRO subscriptions we provide analyses of Bitcoin, Gold, Crude Oil, EURUSD, USDCAD, USDJPY and the S&P 500 every Sunday and Wednesday! Check them out now!