BIDU OR NOT BIDU?

In the immortal words of Shakespear, "to be or not to be...". That has special significance to me today in regards to this high flying Chinese ADR. It has taken a lot of longs and shorts alike for a ride, both pleasurable and agonizing. I have been burned a few times on this stock as well. So, why is this stock my #1 candidate for shorting in this market "correction" or even "crash"? It is because this stock has been powerful on both upside and downside. It has many favorable criterion for shorting. I will post why I think BIDU will test and breach the 200 EDMA and beyond.

1. Chinese stock- No matter how good the stock is, China is the home base and right now, China is untouchable.
2. High momentum traders/speculators- need I say more?
3. Extreme valuation- 90 PE is not a bargain for a company valued at over $3.53 billion dollars but only generating revenue of less than $200 million dollars and declining revenue base.
4. Technical breach of the 50 EDMA- this stock will have a lot of overhead resistance when it tries to climb back.
5. US Market Weakness- housing market meltdown has not started and the idea that the housing market has bottomed is a myth. Liquidity issues related to subprime debacle will intensify and pressure the US economic growth and consumer spending. Inverted yield curve is higher than ever.
6. Denial- most traders and financial professionals are still too complacent as most are treating this as a short term phenomenon and not consider that this infact could be the start of the global stock market bear market.
7. Overextended market conditions- we have not had a meaningful correction since 2004 and much froth needs to be removed from the markt.
8. Cheerleaders- there are alot of die hard cheerleaders for BIDU which is a contrarian indicator.

Bottom line. I will continue to buy June $95 puts as I go forward. Only the brave and experienced traders should attempt to trade the extreme volatility that is likely to come.

As always please be very careful!