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Three factors behind BIDU historic fall

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decline_10 January 24, 2014 (Chinavestor) Investors are clearly uneasy about US listed Chinese stocks after SEC administrative law judge Cameron Elliot suspended Chinese arms of the big four auditors from backing up Chinese listings on the big boards, NYSE and the NASDAQ. Baidu Inc. (NASDAQ:BIDU), the most liquid and largest Chinese listing on the NASDAQ fell as much as $10.85, the most in 52 weeks.Volume was over 9 million shares, three times more than average.

The panic selling did not stop there. Qihoo 360 Technologies (NYSE:QIHU) fell $2.85 while SouFun Holdings (NYSE:SFUN) declined $7.33.

To be fair to Baidu Inc. (NASDAQ:BIDU), yesterday's historical decline was due to several factors. One, the SEC move. Two, overall market sentiment was big time bearish. The Dow Jones Industrial Average (INDEXDJX:.DJI) fell 176 points to close at 5 weeks lows. And finally, Baidu Inc. (NASDAQ:BIDU) has already been battling a resistance level at $185 for the last two weeks. This is clearly demonstrated on the following chart.

Baidu Inc. (NASDAQ:BIDU) fell -$6.27 on January 9, followed by a -$8.66 drop two trading days later. But as the chart reveals these declines were more significant than a regular stock price chart measuring price changes from close-to-close would suggest.


BIDU_201401232

Take a look at the red bars of the chart above. Those bars, measuring open-to-close declines, are actually bigger for Baidu Inc. (NASDAQ:BIDU) on January 9 and January 13 than just yesterday. In other words, intraday declines and weaknesses were a bad omen for a stock battling a resistance level. So when the SEC moved in basically saying that bookkeeping is not considered Vanguard for Chinese stocks, a big dip was guaranteed. The question going forward is where the bottom just might be. Given that Baidu Inc. (NASDAQ:BIDU) fell along huge volume, more downside is coming for now...



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