Thanks to a combination of post-pandemic headwinds and the unique challenges brought on by the Trump administration, Chinese internet tech giant Baidu (BIDU) has struggled for traction. Since the start of this year, BIDU stock has only gained 6%. And in the past 52 weeks, it’s down more than 19%. Set to disclose its first-quarter earnings report on Wednesday before the bell, circumstances aren’t exactly pleasant.

Nevertheless, contrarian speculators interested in high-risk, high-reward ideas should keep close tabs on BIDU stock. From a quantitative perspective, Baidu could be signaling a positive outcome.

In the past 10 weeks, BIDU stock printed a “3-7” sequence: three up weeks mixed with seven down weeks, with a net negative trajectory across the period. In the past decade, this particular sequence has materialized 69 times. Statistically, in 58% of cases, the following week’s price action resulted in upside, with a median return of 3.77%.

On Friday, BIDU stock closed at $89.34. Theoretically, then, there’s a solid probability that BIDU stock could be trading around $92.71 when the closing bell rings out on May 23.

As a baseline, the chance that a long position in BIDU stock will be profitable over any given one-week period is only 49.1%. Your standard blue chip will generally feature weekly long-side odds of around 51% or 52%. BIDU in recent years has suffered a negative bias. But because of the 3-7 sequence, the odds favor the optimistic bettor, at least from a near-term perspective.

Focusing Only on the Falsifiable Metrics of BIDU Stock

To be sure, measuring sequences of positive and negative weeks is not a standard mechanism of analysis. However, I focus on this approach because fear and greed are one of the few falsifiable metrics that can be quantified across various sentiment regimes.

In other words, I have given up on the idea that visual patterns — head and shoulders, cup and handles, and various pennants and wedges — offer useful insights. The main challenge with technical analysis is falsifiability or lack thereof. What could be considered a bullish pattern, another analyst might consider bearish. There’s no empirical standard to categorize these shapes, making projections more like guesswork rather than methodology.

In contrast, while categorizing weekly sequences may seem awfully simplistic, the process is falsifiable. As a consequence of this falsifiability, we’re able to determine the 58% long-side success ratio as a response to the 3-7 sequence.

Earlier this month, I mentioned that First Solar (FSLR) was also flashing a quantitative signal — coincidentally another 3-7 sequence. At time of publication, FSLR stock was trading hands at around $127. In a matter of days, the security exploded higher.

Now, I’m not suggesting that BIDU stock will enjoy a similar magnitude of performance. And to be honest, FSLR greatly exceeded what I thought it was capable of delivering. Still, the point is that there was a clear quantitative signal flashing for FSLR that nobody was talking about prior to its moonshot.

For this coming week, it’s Baidu that’s waving its arms at traders.

Swinging for the Fences

Those who want to take a crack at the empirical approach of BIDU stock may consider the 90/92 bull call spread expiring May 23. This transaction involves buying the $90 call and simultaneously selling the $92 call, for a net debit paid of $83. Should BIDU rise through the short strike price at expiration, the maximum reward is $117, a payout of nearly 141%.

Barchart Premier members have access to gamma exposure data, which notes that for the May 23 options chain, gamma exposure becomes positive from the $92 strike price and above. This could mean greater resistance at this range, making this price an ideal target for a near-term debit spread.

However, traders should also be aware that gamma exposure is decidedly negative between $82 and $88. Therefore, a disappointing result from Baidu’s earnings disclosure could see a rather steep decline in BIDU stock. Still, the geometry of the bull spread means that you won’t lose more than the net debit paid.