Check out our trade on Cisco (CSCO) from today, and a good setup on Nvidia (NVDA) for tomorrow. (November 15, 2018)
CSCO NVDA
Cisco ( NASDAQ: CSCO ); I mentioned in yesterday’s Chart of the Day that the stock was gapping up, probably going to gap and then kind of crap, move a little lower. Let’s look and see how that trade worked out.
You look at it on the daily chart and it kind of looks like, hey, maybe the stock is going to move higher, I probably shouldn’t have shorted the stock. But this isn’t the point. There is a reason why I called the day trading methodology that we use the 59-Minute Trade because you are just trading during the first hour of the day.
Here the stock did exactly what you are looking for it to do, it gapped up. And remember, the idea was if it gaps up it has to start trading BELOW the opening print, which right here was 46.87. It has to start trading below the opening print and that is when you short the stock. So if you are shorting it here, you can even just short it at 46.75, ride this thing all the way down. This little rebound here, I have talked about this before, I call it a natural reaction, you get this little whoop-de-do here, a sell-off and then a little rally. The stock tries to come back up, typically it doesn’t, and then the stock continues lower.
So if you sold that right at the even number of 46.75 and waited until the stock rebounded on the 5-minute chart to give you a green candle here, this type of thing, you get more than a dollar out of this trade. And if you are leaning on it on the way down that can be a pretty nice move. The point is, this was a good trade that worked out.
So if you look at the thing for tomorrow, check out NVIDIA ( NASDAQ: NVDA ) going the other way. Now the implied move was $180.00 to the downside. So this stock, if the options market is correct and typically it is, it doesn’t mean that option traders are correct; most traders lose money because they are on the wrong side. But if the option SELLERS are correct NVIDIA ( NASDAQ: NVDA ) is going to revert back to above $180.00.
So tomorrow, what are we going to look for? You are going to look for this; I am not saying it is going to happen but this is what you are looking for. You are looking for the stock to gap down here, start moving up and this when you are buying it with your stop down below the low. You are looking for the stock to rally up. You buy the stock and then at some point, I don’t know where it’s going to be, it might be at 170.00, it might not be until 188.00. But at some point the stock is going to pause a little bit as buyers kind of lighten up a bit; short covering lightens up a bit, the stock finds a little more selling and then it winds up doing this.
So you are buying right here, depending on how high this is you might sell some up here. Sell when the stock first starts to falter then you take some off the table. I think a lot of times it is best to hang on to what you have, you’re going to be giving up a little bit. And then when the stock breaks ABOVE this last high here, when the stock breaks above there, that’s when you buy more. So you are buying a little bit here off the open as long as the stock is moving up. And then you buy a little bit more when the stock breaks to a new high after an almost inevitable little pullback here.
So I am telling you, use this technique. You will be amazed at the number of times that it works. You can’t even see where this stock is trading here, you have got to get it down here. So this is definitely a stock that is ripe for a trading rebound tomorrow. Will this be THE low? I have absolutely no idea and nobody else does either. We will just look at this for a potential trade. Got to be moving up, don’t catch a falling knife. I think you are going to be fine on this.
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