Is this a Reversal Pattern for Baidu ?

Published on Wednesday, 12 September 2012 04:48 Written by TradersHuddle Wire

New York, September 12th (TradersHuddle.com) - Shares of Baidu, Inc. (NASDAQ:BIDU) ended the trading session higher by $0.13 or 0.12% from its previous close. Baidu's price action in the session formed what is considered to be a Hammer, where bears drove prices lower intraday. However, the strong finish indicates that bulls regained control, forming a trend reversal.

Baidu, Inc. (NASDAQ:BIDU) provides Chinese language Internet search services primarily in China and Japan. The Company offers algorithmic search, enterprise search, pay for performance and news, MP3, and image searches.

Baidu's stock has been trading in a well defined range with calculated support at $106.87 and resistance at $132.08. This range can be used by traders to plan their next moves.

Traders wanting to establish a position in Baidu or traders that are already holding the stock can use the hammer formation to their advantage, since the pattern signal a potential bullish trend reversal.

The Hammer is an important candlestick pattern, as it can mark bottoms and support levels. Further buying pressure, and preferably on expanding volume, is needed before acting, as heavy volume will serve to confirm the validity of the reversal.

In the case of Baidu, traders who want to add to their positions or start a new position, need to watch for confirmation of the reversal. Below a Hammer illustration: