Baidu's 16.02% Four-Day Decline Validates Bearish Death Cross and MACD as Downtrend Intensifies

Candlestick Theory

Baidu’s recent price action reveals a bearish trend marked by a four-day consecutive decline of 16.02%, with the latest session dropping 8.09%. Key support levels emerge at $120.31 (a recent low) and $114.82 (an earlier consolidation level), while resistance clusters near $135.40 and $137.90. The candlestick patterns—such as the long lower shadows on October 7 and 9—suggest temporary rejection of lower levels, but the absence of bullish reversal formations like hammers or bullish engulfing patterns indicates sustained bearish momentum. The price has failed to reclaim key psychological thresholds, such as $130, reinforcing the likelihood of further downside until these levels hold.

Moving Average Theory

The 50-day moving average (calculated at approximately $130–$132) currently lies above the 200-day MA ($128–$130), creating a bearish “death cross” configuration. The 100-day MA ($129–$131) aligns with the 50-day, suggesting short-term and long-term trends are in sync. The closing price of $121.69 sits well below all three MAs, indicating a strong bearish bias. A retest of the 200-day MA could trigger further selling if the price fails to close above it, while a break above the 50-day MA might signal a temporary countertrend rally.

MACD & KDJ Indicators

The MACD histogram has turned negative, with the line crossing below the signal line—a bearish death cross—confirming the weakening trend. The KDJ indicator shows oversold conditions (K=20, D=25, J=15), but this may reflect exhaustion rather than a reversal, as the RSI and MACD suggest the downtrend remains intact. Divergences between the KDJ’s stochastic lines and price action are minimal, but a sustained close above $125 could trigger a short-term bounce.

Bollinger Bands

Bollinger Bands have widened significantly during the recent volatility, with the price testing the lower band ($120.31) on October 10. The 20-day standard deviation has increased to 5.5%, reflecting heightened uncertainty. A contraction in band width could precede a breakout, but given the bearish momentum, a continuation below the bands is more probable. The mid-band at $130.50 acts as a critical psychological hurdle; a breach above it would invalidate the current bearish scenario.

Volume-Price Relationship

Trading volume has surged during the decline, with the October 10 session recording 9.78 million shares—among the highest in the dataset. This validates the bearish move, as increased volume typically confirms trend strength. However, the recent drop in volume on October 8–9 (despite continued price declines) may signal waning conviction. A divergence between volume and price could precede a short-term reversal, but sustained bearish pressure is likely if volume remains elevated.

Relative Strength Index (RSI)

The RSI has dipped into oversold territory (around 25–30), but this is a false signal in the context of a strong downtrend. The indicator’s failure to rebound above 50 despite oversold readings suggests exhaustion rather than a reversal. A bullish crossover above the 40 level would require a 6–8% rally, which appears improbable without a catalyst. The RSI’s divergence with price action is minimal, reinforcing the bearish outlook.

Fibonacci Retracement

Fibonacci levels drawn from the September 17 high ($138) to October 10 low ($120.31) identify key support at $125.57 (38.2%) and $121.69 (50%). The 61.8% level ($117.80) is a critical area to watch, as a break below it could accelerate the downtrend. Resistance lies at $130.03 (38.2%) and $135.40 (78.6%), which have historically repelled upward moves.

Backtest Hypothesis

The MACD death cross observed on October 10 aligns with historical patterns where Baidu’s stock underperformed in the short to medium term. Backtests show that while 3-day, 10-day, and 30-day win rates are relatively balanced, the maximum return over 30 days remains negative at -1.90%. This suggests the death cross may not reliably signal a reversal or buying opportunity for Baidu, given the stock’s susceptibility to prolonged bearish momentum post-event.