$NVDA Might be a beachball, but it’s not bouncing yet – December 9, 2021
NVDA SMH
This is Scott with your Chart of the Day. A couple of days ago I talked about NVIDIA ( NASDAQ: NVDA ) and how I thought it could potentially be a beach ball and bounce and help make the market go higher.
Normally, on a lot of free internet videos, you are going to get some people and some traders who just celebrate their wins and tell you how great they are. Well, that is not what we do at Stock Market Mentor, we trade for real. I’m a real trader and I trade a real account. I think it’s important not only to cover trades that worked out but also ideas that didn’t work out and what to do next. That is what I am doing here with you and NVIDIA ( NASDAQ: NVDA ).
What I was looking for the other day here on NVIDIA ( NASDAQ: NVDA ) was a move through this day’s high at around 324.50 and a push-through on volume. My thesis was, if that can happen I think the market could potentially continue to rip higher because it is then moving to retest the highs here right around that 350.00 of level.
What really happened is, the day after the video we had, on this day here, just kind of a quiet inside day. And that is actually a pretty good thing, it’s a quiet day within consolidation. And if we look at the Semiconductor ETF ( NASDAQ: SMH ), it had a nice quiet inside day on low volume. And on inside days I love looking for low volume because it just means everyone is just kind of hanging out at the party. They are just chilling, right?
No one is aggressively selling but no one is also aggressively buying. We are just kind of feeling things out here a little bit. I saw that here on SMH ( NASDAQ: SMH ) and I actually took a small starter position in NVIDIA ( NASDAQ: NVDA ) with a stop under the previous day’s low.
Now, when the stock challenged the high here and got rejected, that’s when I started to really kind of take notice and I moved my stop up to the low of the previous day. And so I ended up getting stopped out of NVIDIA ( NASDAQ: NVDA ) on my small starter position, I think it was around 314.00, something like that. As you can see, the stock ended up blasting through 314.00 and closing under that 21-day exponential period moving average. So not only did it break the low of yesterday, but it also broke the low of Tuesday here during this consolidation.
Had I not moved my stop up to the previous day’s low potentially I could have been sitting on, let’s see, I think it was in around 319.00-320.00, something like that. That’s about a 4.5, just almost 5 percent loss. I don’t like to take 5 percent losses on positions where I am just trying to get started on a position, just trying to get a feel for it. Do you know what I mean? I think it’s really important, especially when the market is choppy, to be a little tighter on some of your stop losses on speculative positions.
What I thought would happen here, if the market cooperated was, we would have a big up day like we did on the day that I did the video, we’d have a quiet inside day and then a continuation and a break to the upside. My idea was to get a little stock here just to keep it in my account. If I have stock in my account chances are I am going to remember it and I am going to pay attention to it, and it’s going to be on my radar.
And so I took some stock here thinking, okay, I will then add with a break of this day here. We ended up not getting a break of that day there and because of that, that caused me to move my stop up. And so by doing that I ended up saving myself almost 3 percent of potential losses.
I think it’s important, again, just to cover trades that didn’t work out because not all of them are going to, especially when the market is choppy like it is right now. That is just a tactic that I have used in recent history to kind of mitigate losses when I am trying to get started on a stock because I think a setup is going to play out, but then mitigating a loss when it clearly isn’t.
Free Chart