When market leaders such as BIDU make a significant price reversal it’s a clear market signal. Wednesday’s loss was Baidu’s biggest percentage drop and price drop since June 29, when the stock fell $6.87, or 9%, in big volume.
That move established a short-term low, but circumstances were different. The NASDAQ was then near a low, not a high.
BIDU isn’t the only leader experiencing a loss of upward momentum. Several market leaders have seen price pull-backs in recent weeks. NFLX is 14% off its high, VIT is down 16%, CTRP is down 22%, and EBIX is down 21%.
When the market rolls over, it’s never clear whether it’s a “healthy pullback” that will set up for another price advance, or the beginning of a new Bear Market (a drop of 20% or more.) Astute traders, such as those at Options Animal, who have learned how to protect themselves with options, will be able to trade whatever the market gives them.
Not all leaders have been wounded this week.Apple, Lululemon Athletica and Priceline.com are holding up fairly well.But, leaders lead the market, in whichever direction the market is moving.When a number of leaders stumble, pay attention!