Wondering about Nvidia (NVDA)? Here’s some artificial intelligence based on the stock chart. (March 20, 2018)
NVDA
NVIDIA ( NASDAQ: NVDA ). I wanted to cover this because the stock has been forming, as you can see, a flat triangle for a while. This is a much-loved stock; apparently, Cramer’s dog is named Nvidia. I don’t really know if that is true or if it is a show business dogs name; kind of like Rin Tin Tin or Lassie. There were several Lassies and several Rin Tin Tin’s. One could sit down; one could look concerned. One could bark a lot; one could sit; one could lay and another could just be cute; I don’t know. So maybe that is a dog and maybe it isn’t.
What we are looking at here with NVIDIA ( NASDAQ: NVDA ) is a potential breakout here. It is like you wait and you wait and you wait for this stock to squeeze. What I want to do is wait for about 253.00 on a breakout. That would give me a good indication that there is a lot of scrambling trying to snag NVIDIA ( NASDAQ: NVDA ) stock before it moves even higher.
This has been in consolidation for a while. You can see the trend, if you just zoom way, way, way out looking back here in 2016, it has been fairly orderly, which is what a lot of trends look like when you are up in the satellite looking down at the planet earth. This is all very, very clear right here but it is really not when you dig into it and really get into the kind of volatility that this stock has generated. It is down 17, almost 20 percent in just a week’s worth of trading so this isn’t as easy as you might think.
Here is what I would do: Let’s say you are buying this now. Well, where is your stop? The logical place would be below the 50-day moving average; maybe actually you would have to take it down below 230.00. I wouldn’t, I would keep it here at about 234.00. You look at the distance in points. First of all percentage-wise, it is between 5 and 6 percent. You are keeping a pretty tight stop on it because your thesis here is, “I think the stock is going to breakout. If it pulls back, back below 240.00 it is either going to rebound off the 50-day moving average, which is fine; or it is not and that is not fine. So I think I will take this risk here, 5.5 percent, that is almost $14.00.”
What you want to do is, after you look at the 5.5 percent and say. “Okay, that’s reasonable. I would like to make it 3 percent or something. Maybe I will make it a little tighter; make it too tight.” You are just guaranteeing to get stopped out on just the normal volatility. But let’s say you like it down here and then you say, “Okay, $14.00 is really what I am talking about now. Not percentage wise, not 5.6 percent but $14.00 per share is what I am giving this.” And so now you forget about the percentage, just look at the bucks. How many shares are you buying? Fourteen dollars times that number of shares, is that an acceptable loss for you? You have to factor that in. If you don’t factor it in then you are not trading prudently. You are not trading with any kind of discipline or control.
So just make sure you do that calculation. It is really simple, what is the dollar per share you are risking based on where you bought? Versus where your stop is; multiplied by the number of shares that you bought. Can you handle that risk? And by the way, you should HAVE a dollar amount, a universal dollar amount, on your trading account that gets down to an individual trade. Like, “Okay, based on my account size I will risk no more than 1 percent.” Not take a position that is no more than 1 percent but take no more of a dollar risk that is 1 percent or 2 percent or whatever your number is of my account size based on the number of shares I am buying; and then the difference between the purchase price and the stop price.
If you are NOT doing that kind of thing you are really trading with a lot more risk than you realize, and that is a two-sided risk. The risk, of course, of taking a bigger loss than you expected. Versus the risk of NOT making a gain on a stock that you were actually right on. Maybe that is because you didn’t buy it or you got shaken out or maybe it is just because you only bought 12 shares. So make sure you are doing this calculation: What is your maximum risk in dollars? And then you can trade more effectively.
Free Chart