Another update on NVDA as its much awaited stock split is set for tomorrow after the close. It should be no surprise that we have witnessed the sell off in price as most news events, especially stock splits, are sold by smart money.
It is my personal opinion that after the split, the stock will run back up in price in the coming days, but in the meantime I stick to the chart and allow that to tell me what the news is. So with no further delay lets get into it.
In the previous update we talked about how NVDA would at least retest the $762 level after abruptly breaking it on the Thursday close. This did indeed occur, however, we did not see much else after that as the price plunged further after confirming rejection and broke clean below our infamous .236 fib level.
This is where the trade setup now begins in the fact that there are a few ways to approach this opportunity:
1) A limit buy order centered around the $715 price with a long at $720 and a tight stop loss just below the $715 price level. Keep in mind that this would be calling the bottom and unfortunately it is impossible to ever know the exact bottom even with fibonacci retracement.
I am more interested in the meaty, high volume areas in between the top and bottom rather than stressing about the exact bottom and tops of price action.
The 2nd option, which is what I mentioned in the previous update, is to wait on a breakout of $744 (.236 fib) now that we have had our capitulation below it. This is my own personal favorite strategy and should price action break back above this level on the daily, I will be entering a long with a tight stop loss just below $744.
It should be noted, however, that if the fib levels plotted here are to continue to be respected, the .236 level should serve as a springboard that could quickly send the price back above $762 to ultimately retest $777.
Lastly, we should also be forming a gameplan if Nvidia goes the ultra bearish route by violating my fib retracement completely by breaking and closing below $715. Please know this is always a possibility and a good trader must be prepared for it. If that happens, a separate brand new idea will posted as there are excellent support levels below $715.