Short Baidu

If you want to make a quick speculation, I think there is a good target right now: short Baidu (BIDU). Since about 2 years ago when Google started to get significant conflicts with the Chinese government and eventually was de facto kicked out, Baidu has taken a huge competitive advantage and occupied the vast majority share of the online search market in China. Investors has pushed BIDU share prices to an unbelievable level. Its current P/E ratio is over 55, which is extremely expensive. Think about it: Google has only a P/E ratio of 22. Now more and more signs indicate that China's economy is slowing down quickly. This won't bode well for Baidu. So there is a fundamental reason to doubt whether Baidu's extreme expensive stock price can continue.

The more troubling sign is from its price action. BIDU has recently broken its long term uptrend line (the green line on the chart). Technically speaking, when a stock breaches its long term uptrend, it will usually bounce back to test the trend line, a kiss from below. This is very bearish since it often fails to break through and will then plummet quickly from that level. There is a catalyst to push it down further: BIDU will report its earnings on Oct 27. I bet it will disappoint investors, which will certainly be a disaster for its share price. That's why I want to short BIDU early next week before Oct 27. You can simply short its shocks, or buy its put options, or even better use put spreads to increase your chance of success.

Again, it is purely a speculation with a high risk. Only bet with the money you can afford to lose.