Baidu (BIDU) Falls 4.12% as Bearish Engulfing Pattern and Death Cross Signal Deepening Downtrend Amid Oversold RSI

Baidu (BIDU) closed the most recent session at $138.94, down 4.12%, marking a bearish reversal from recent bullish momentum. The candlestick pattern suggests a potential breakdown, with a bearish engulfing forming as the price closed below a prior lower shadow. Key support levels are identified at $138.94 (recent close) and $131.77 (September 30 low), while resistance clusters near $144.91 (October 6 high) and $146.50 (October 7 high).

Candlestick Theory

The recent price action reflects a bearish bias, with the 4.12% decline forming a shooting star pattern, indicating rejection at higher levels. A breakdown below $138.94 could target the next support at $131.77, with a stop-loss likely placed above $144.91 to confirm the bearish scenario.

Moving Average Theory

The 50-day MA (calculated from the most recent 50 trading days) stands at $132.45, below the 200-day MA of $136.89, forming a bearish "death cross." The 100-day MA at $134.23 acts as a dynamic resistance. The current price of $138.94 is above the 50-day MA but below the 200-day MA, suggesting short-term bearishness within a longer-term consolidation phase.

MACD & KDJ Indicators

The MACD histogram has turned negative, with the MACD line crossing below the signal line, confirming bearish momentum. The KDJ stochastic oscillator shows the %K line at 22 and %D at 28, indicating oversold territory (below 30), though the divergence between price and oscillator suggests a weak oversold condition in a downtrend.

Bollinger Bands

Volatility has expanded, with the price hovering near the lower band ($138.63–$146.50 range). A contraction in band width earlier in October (e.g., September 17–24) preceded the recent breakout, suggesting the current move could continue. A rebound above the middle band ($142.77) may test the upper band, but bearish momentum remains dominant.

Volume-Price Relationship

The recent 4.12% drop coincided with elevated volume ($4.05 million shares), validating the bearish move. However, volume has been inconsistent in recent rallies (e.g., October 1–3), indicating weak conviction in buying pressure.

Relative Strength Index (RSI)

The 14-period RSI stands at 29, entering oversold territory. While this could signal a short-term rebound, the RSI has failed to close above 30 in the past week, suggesting a bearish bias. Caution is warranted, as oversold readings in downtrends often precede further declines.

Fibonacci Retracement

Applying Fibonacci levels from the recent high ($149.51 on October 6) to the low ($131.77 on September 30), key retracement levels are $143.78 (38.2%), $140.06 (50%), and $136.34 (61.8%). The current price of $138.94 is testing the 50% level, which may act as a pivot for near-term direction.

Backtest Hypothesis

The described backtest strategy (buying on RSI <30 and MACD golden cross, holding 20 days) conflicts with the provided data, which references RSI >70 (overbought) in the example. This discrepancy suggests a potential misalignment in the strategy parameters. If adjusted for RSI <30 and MACD bearish crossover (death cross), the strategy might yield limited profitability, as seen in the referenced 36.03% return vs. a 37.69% benchmark. The low Sharpe ratio (0.27) indicates suboptimal risk-adjusted returns, highlighting the need for additional filters (e.g., volume confirmation, trend alignment) to refine the approach.