Time to short Cramer’s dog? Let’s look at Nvidia (NVDA). (December 13, 2017)
NVDA SMH NVDA
I want to look at NVIDIA ( NASDAQ: NVDA ) today. I covered this in the Strategy Session tonight and also I have been talking about this recently as one that you don’t want to be involved in and this is why: This is a key breakdown. If we look at the semiconductor sector ( NYSEARCA: SMH ) you can see that all these semis have been trading lower. Frankly, first of all, I don’t like to go against the grain to begin with. So if the whole stream is going downhill, which streams always do, I am not trying to find the one stock in the sector that is moving the other way; I just think that is tough money to make.
When the semis are trading down like this I actually look for shorting opportunities or at least areas or stocks that should be sold. But I look for shorting opportunities and so that is kind of what you have got going here. And look, remember NVIDIA ( NASDAQ: NVDA ), it is loved. Cramer has apparently named his dog after it. I am sure he probably has a dog house for it now. This is a widely loved stock. I forget exactly what the news was, I think some analyst was talking about how even if Bitcoin changes or something about the cryptocurrency, I don’t really listen to the analysts much because they don’t really make you money. They say, “Oh NVIDIA is still going to have really good business if this happens or that happens and the other thing.”
All I know is this: The stock traded down over 2 percent today on some kind of good news. The stock has been up how much from January somewhere around here? It has gone up over 100 percent; this is profit taking. There is nothing wrong with the company but this is what happens with these high-flying stocks. At some point they top out and then when they start declining they go farther than you might think. The reason is because the participants in the stock are different. Institutions buy a stock (we can go back as much as we want to), institutions are buying stocks in these base levels. They soak up enough float that then when some good news comes out and folks want to buy the stock it is not that easy to buy; that is not the case here it is almost 500 million shares traded.
The stock starts moving up and then at some point you are going to have institutions buying the stock. And up towards the tail end you have got retail traders buying the stock because they here all the bullish news. And so they bought it at 200.00 and the stock goes up to 220.00. Then it starts selling off and they buy more than 200.00 because they think it is an opportunity. Then the stock is down here and these same retail traders are thinking, “Well, the markets are rigged. Because like now it was going up at 200.00, now it has come back and nobody is buying the stock. I got suckered in, etcetera, etcetera.” No, you just didn’t understand the dynamics of trading. How the participants, the buyers, change as time marches on and the price marches higher.
The same traders, the same funds that were buying the stock here aren’t buying it here. Momentum traders who were buying the stock at 180.00, listen to me I am giving you pearls here, the momentum traders who were buying this at 180.00, 190.00, and 200.00, they are not buying the stock now, even though they were a couple months ago. The reason they are not is because the reason for getting in the stock is gone. They are buying the stock at whatever level it is they bought it at, they are buying it because they see the stock moving higher and they want to be a part of it. Now the stock hits that same level only this time it is on the way down, they don’t want a part of it; they are done. This stock should move lower here; I think you can short the stock even now.
The better entry would have been yesterday or even this morning but I think it still has got even more downside in it; then you put a buy stop just a little bit above 195.00. The stock would kind of be due for a little bit of a rebound tomorrow just because that is what these stocks do; they kind of trap the bulls. You are buying it tomorrow and then when it starts rolling over then you are happy. Only if the stock moves up above 195.00 do you want to short this stock. So at this point I am looking at NVIDIA ( NASDAQ: NVDA ), irrespective of any good news that comes out, I am looking at NVIDIA ( NASDAQ: NVDA ) to actually start trading lower. I would be surprised if it didn’t test 175.00, maybe even 170.00. Beyond that, I am just taking it one buck at a time; I am short and I think it will work for you.
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