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Decoding Nvidia’s 35% Tumble: A Technical Analysis Masterclass

Deron Wagner — Mon, 12 Aug 2024 10:37:00 +0000

In the high-stakes world of AI stocks, even giants can stumble. Join us as we dissect Nvidia’s recent 35% correction and uncover what it means for traders and investors alike.

In the ever-evolving landscape of the stock market, few companies have captured the imagination of investors quite like Nvidia. As the undisputed champion of AI stocks, Nvidia’s meteoric rise has been nothing short of spectacular. But what happens when a stock that seemed unstoppable suddenly shows signs of weakness?

Welcome, traders and investors, to a deep dive into the recent correction of Nvidia’s stock price. I’m Deron Wagner, founder of Morpheus Trading Group, and today we’re joined by our head stock analyst Rick Pedicelli who is going to unravel the complexities of Nvidia’s recent market behavior using our signature multi-timeframe analysis approach.

Rick Pedicelli here.
Let’s start by setting the stage. Nvidia has been on an absolute tear, with a mind-boggling 600% run since breaking its downtrend line in January 2023. This kind of performance doesn’t just turn heads; it redefines what’s possible in the market. But as any seasoned trader knows, trees don’t grow to the sky, and even the mightiest stocks need to take a breather.

Now, let’s zoom in on the daily chart, where the short-term drama is unfolding. For those new to technical analysis, we use the 10 and 20-day moving averages (MAs) to gauge short-term trends, while the 50-day MA gives us a view of the intermediate trend. In a strong uptrend, we typically see the price above the 20-day EMA, which in turn is above the 50-day MA. This is where the “easy money” is made on the long side.
But here’s where things get interesting. Nvidia has recently broken below both its 20-day and 50-day MAs. This isn’t just a minor hiccup; it’s a significant change in character for the stock. We’re seeing lower lows and lower highs forming below the 50-day MA, a clear sign that momentum is shifting to the bears, at least in the short term.

Let’s put this correction into perspective. We’re looking at a 35% pullback from the highs, which is notably deeper than previous corrections of around 21%. Is this cause for panic? Not necessarily. Remember, this comes after a 16-month, 600% advance. Even the most robust stocks need to consolidate gains, and for a mega-cap name like Nvidia, this kind of breather is not out of the ordinary.

Switching gears to the weekly chart, we see confirmation of our daily analysis. The stock has broken below its 10-week MA, with the average starting to curl downwards. This is another sign of that change in character we mentioned earlier. However – and this is crucial – the 40-week MA (roughly equivalent to the 200-day MA on the daily chart) is still in a strong uptrend.

Here’s where things get really interesting for longer-term investors and swing traders. In a strong uptrend, the first touch of the 200-day MA (or 40-week MA on the weekly chart) often provides significant support. We haven’t seen this touch yet, but it’s something to watch for. When it happens, it could present a lower-risk entry point for those looking to establish or add to long-term positions.

Now, let’s zoom out even further to the monthly chart. Here, we use the 8-month EMA as our guide. Throughout Nvidia’s powerful uptrend from 2020 to 2022, the price consistently held above this moving average. The good news? It’s just touched and bounced off this level in the current month. This is a positive sign for the long-term trend, suggesting that despite the short-term weakness, the larger bullish structure remains intact.

So, what’s the playbook for traders and investors moving forward?

Short-term traders: The landscape is challenging right now. With Nvidia below its 50-day EMA and a downtrend line in place, there’s not much to do on the long side until we see higher lows forming and a push back above the 10-week EMA.
Intermediate-term traders: Watch for a potential touch of the 40-week MA. This could offer a lower-risk entry point if you believe in the long-term Nvidia story.
Long-term investors: Keep an eye on the 100 level (with some wiggle room down to 92). As long as the price holds above the 8-month EMA on the monthly chart, the long-term uptrend remains intact.

Key Takeaways:

Nvidia’s 35% correction is significant but not unusual given its massive prior advance.

Short-term momentum has shifted bearish, but long-term trend structures remain bullish.

The first touch of the 200-day MA could provide a key support level and potential entry point.

Long-term investors should watch the 8-month EMA on the monthly chart for signs of trend health.

Remember, in trading and investing, context is everything. While Nvidia’s recent price action might look scary on the daily chart, zooming out to the weekly and monthly timeframes paints a more nuanced picture. This correction could very well be the “left side of the base” forming, setting up for the next leg higher.

As always, manage your risk, size your positions appropriately, and never forget that in the market, anything can happen. Stay vigilant, keep learning, and most importantly, trade what you see, not what you think.

WATCH the following video for more:

Elevate your trading journey with Morpheus Trading and Rick Pedicelli’s wealth of experience.

If you found these insights valuable, hit that like button and subscribe for more in-depth analyses.

For precise entry and exit points on top swing trade setups, visit MorpheusTrading.com and join our MTG Tribe.

In trading, the learning never stops. Keep pushing, keep growing, and always trade with confidence.
And always remember, trade what you see, not what you think!

Join the exclusive MTG tribe in uncovering potential profit opportunities with a proven swing trading strategy.

Thanks for joining us on this journey, and until next time, happy trading!

Stay Connected:

Stay Informed:

The post Decoding Nvidia’s 35% Tumble: A Technical Analysis Masterclass appeared first on Swing Trading Blog | Trading Strategy Articles | Trading Tips.

Navigating the NASDAQ Nosedive: How MTG Tribe Dodged the Bullet and What’s Next

Deron Wagner — Thu, 25 Jul 2024 10:37:00 +0000

Last week’s NASDAQ plunge caught many off guard, but not the MTG Tribe. Here’s how we saw it coming and what savvy traders should watch for next.

Traders, let’s talk about what just happened in the market. Last week, we sounded the alarm: the NASDAQ was showing signs of weakness, and we cautioned that sometimes, the best trade is no trade at all. Fast forward to today, and boy, did that advice pay off.

The QQQ not only failed to reclaim its 20-day EMA but also took a nosedive, culminating in a jaw-dropping 3.5% drop in a single day. While many traders watched their portfolios bleed red, our MTG Tribe members were sitting pretty, their capital intact and ready for the next opportunity. How did they pull it off? Stick around, because we’re about to show you.

I’m Deron Wagner, founder of Morpheus Trading Group, and today I’m joined by our head stock analyst, Rick Pedicelli. With over half a century of combined market experience between us, we’re going to break down what just happened to QQQ and the NASDAQ, and more importantly, how to spot when it might be safe to dip your toes back in the water.

The Anatomy of a Market Breakdown:

Let’s rewind to our last analysis. We highlighted several red flags that had our spidey senses tingling:

QQQ’s Break of the 20-day EMA: This wasn’t just any old dip. After an extended upward move, QQQ sliced through its 20-day exponential moving average like a hot knife through butter. In a strong bull market, we expect to see price action respecting this level. When it doesn’t, it’s time to pay attention.
RSI Divergence: While QQQ was making higher highs, its Relative Strength Index (RSI) was painting a different picture, showing lower highs. This divergence is often a precursor to a trend change, and boy, did it deliver this time.
Sector-Wide Weakness: It wasn’t just QQQ. We saw similar patterns in XLK (Technology Select Sector SPDR Fund) and the semiconductor index. When an entire sector starts showing cracks, it’s rarely a good sign.

The Domino Effect:
As Rick pointed out, after breaking the 20-day EMA, QQQ gave us a classic head-fake. It bounced for a couple of days, luring in the unwary, before resuming its downward trajectory. The price action stalled at resistance from the declining 8 and 20-day EMAs – a textbook example of previous support turning into resistance.

Then came the knockout punch. QQQ gapped lower, smashing through the critical support at 474 and the 50-day EMA in one fell swoop. This is the kind of move that separates the pros from the amateurs. While moving averages often provide support, when the market decides it’s ready for a real selloff, it can blow through these levels like they’re not even there.

The Bigger Picture:
With the NASDAQ now below both its 20 and 50-day EMAs, we’re in correction territory. The 50-day EMA is now our line in the sand for bullish action. Above it, there’s hope. Below it, caution is the name of the game.

Rick highlighted potential support in the 448 to 440 area for QQQ. But remember, in trading, we never assume. We take it one day at a time, always ready to adapt to what the market gives us.

What’s Next? The Follow-Through Day Concept:
Now, here’s where it gets interesting. With the NASDAQ down more than 8% from its highs, we’re on the lookout for a follow-through day. This is a crucial concept that’s served us well for over two decades.
A follow-through day is a rally of 1.5% or more on day four or later of a new rally attempt. It’s not foolproof, but it’s a reliable indicator that institutional money is starting to flow back into the market.

Here’s how to play it:

Wait for the price action to stop making lower lows on the daily chart.

Look for a strong up day (1.5% or more) on higher volume, starting from day four of the rally attempt.
If we get this follow-through day, that’s our signal to start carefully adding long exposure.

Remember, every market bottom is different. We might see failed rally attempts before the real move higher begins. That’s why we start small, add exposure if our initial positions work out, and quickly cut losses if they don’t.

Key Takeaways:

Always respect technical breakdowns, especially when accompanied by divergences and sector-wide weakness.
Sometimes, the best trade is no trade. Our model portfolio has been mostly in cash since July 17th, avoiding significant losses.
Watch for a follow-through day as a potential signal to start re-entering the market.
Be fluid. If the market tells you to add exposure, do so. If it says to back off, listen.
Managing your equity curve is crucial. Preserve gains and limit losses, but avoid completely selling out of strong trends too early.

Remember, trading isn’t about predicting the future. It’s about managing risk and being prepared for multiple scenarios. By understanding these key levels and concepts, you’re equipping yourself to navigate whatever the market throws at us next.

Stay sharp, stay disciplined, and as always, trade what you see, not what you think.

For deeper understanding, WATCH the video below:

Elevate your trading journey with Morpheus Trading and Rick Pedicelli’s wealth of experience.

If you found these insights valuable, hit that like button and subscribe for more in-depth analyses.

For precise entry and exit points on top swing trade setups, visit MorpheusTrading.com and join our MTG Tribe.

In trading, the learning never stops. Keep pushing, keep growing, and always trade with confidence.
And always remember, trade what you see, not what you think!

Join the exclusive MTG tribe in uncovering potential profit opportunities with a proven swing trading strategy.

Thanks for joining us on this journey, and until next time, happy trading!

Stay Connected:

Stay Informed:

The post Navigating the NASDAQ Nosedive: How MTG Tribe Dodged the Bullet and What’s Next appeared first on Swing Trading Blog | Trading Strategy Articles | Trading Tips.

Mastering Explosive Stock Moves: A Comprehensive Guide to the 3/20 Trading Scan Strategy

Deron Wagner — Thu, 08 Feb 2024 11:37:00 +0000

Uncover the secrets of consistent trading success with Rick Pedicelli from MorpheusTrading. Join us on an in-depth journey into the 3/20 stock scan strategy, a powerful tool designed to identify stocks with explosive potential. With over two decades of trading experience, Rick shares his insights, demystifies stock terms, and guides you through practical case studies. Elevate your trading game with the 3/20 strategy and become a part of the MTG Tribe dedicated to mastering the art of trading.

In the dynamic world of stock trading, the quest for consistency and the ability to identify stocks with explosive potential are perpetual challenges. This guide, presented by Rick Pedicelli from MorpheusTrading, aims to unravel the intricacies of the 3/20 stock scan strategy. More than just a tool, this strategy is a gateway to mastering the art of trading, providing a systematic approach to navigating the complexities of the stock market.

Unveiling the 3/20 Stock Scan
Rick Pedicelli, a seasoned trader with over two decades of experience, introduces us to the 3/20 stock scan, a nightly ritual that serves as a beacon for traders seeking quality over quantity in their watchlists. The 3/20 scan, named for its criteria of a 3% price move with a 20% or greater increase in volume, is a simple yet remarkably effective strategy.

Understanding Stock Terms: A Foundation for Success
Before delving into the intricacies of the 3/20 strategy, it’s essential to clarify some fundamental stock terms to ensure traders of all levels can follow along seamlessly:

Liquidity
Liquidity refers to a stock’s ability to be bought or sold without causing a significant price change. Stocks with higher liquidity tend to have lower volatility.

Volume Analysis
An integral part of technical analysis, volume analysis involves studying trading volumes to gauge the strength of price movements. High volume often confirms the validity of a price trend.

Relative Strength
Relative strength indicates a stock’s performance compared to a market index or another stock. A high relative strength suggests that the stock is outperforming its peers.

Moving Averages
Moving averages are calculated averages of a stock’s price over a specific period. They help smooth out fluctuations and identify trends in the stock’s price movement.

Bull Flag
A bull flag is a bullish continuation pattern that signals a brief consolidation before the prevailing uptrend resumes. Recognizing bull flags is crucial for identifying potential breakout points.

Gap Up
A gap-up occurs when a stock’s price opens higher than its previous closing price, creating a gap on the chart. Gap-ups can indicate strong buying interest and potential upward momentum.

Shakeout
A shakeout is a sudden drop in a stock’s price, designed to remove weaker hands from the market. It often precedes a rally and helps establish a stronger support level.

Navigating the 3/20 Stock Scan: Step-by-Step Guide

Liquidity Filter
The liquidity filter, a foundational aspect of the 3/20 scan, includes criteria such as the close being greater than 15, average volume past 50 days greater than 375,000 shares, and the close being greater than 30% of the 52-week high.

Volume Filter
The volume filter involves a 50-day dollar volume calculation, providing insights into the daily dollar volume a stock achieves. This step is crucial for assessing the liquidity of a stock.

3/20 Component
Identifying stocks that have moved 3% with a volume 20% greater than average is the essence of the 3/20 component. This criteria act as a powerful filter to focus on stocks with significant price movements.

Additional Filters
To ensure a stock has made a decent advance compared to its daily range, the 14-day Average True Range (ATR) is employed. This adds an extra layer of confirmation to the potential strength of a stock.

Relative Strength Filter
The relative strength filter, set to 8% based on 252 days of data, provides insights into a stock’s strength relative to others in the market. It is an essential component for gauging a stock’s overall performance.

Practical Tips: Making the Most of the 3/20 Stock Scan
Rick Pedicelli shares invaluable insights into maximizing the effectiveness of the 3/20 stock scan, offering practical tips for traders looking to enhance their trading strategy:

Focus on Valid Basing Patterns
When using the 3/20 stock scan, focus on stocks that are forming valid basing patterns. Ideally, these patterns should be 15-35% deep, situated around the 50-day moving average, and above the 200-day moving average.

Embrace Gaps
Gap-ups are potent signals that can offer lucrative opportunities. Whether buying the move out or waiting for the first pullback to the eight-day Exponential Moving Average (EMA), gaps can be instrumental in identifying entry points.

Utilize Downtrend Line Breaks
Identifying stocks coming out of a downtrend line break or after undercutting a base low can lead to significant moves. These setups often present themselves as strong entry points.

Monitor Shakeouts
After a shakeout, stocks that hold up are poised for potentially more robust moves. Shakeouts serve to clear weak hands from the market, setting the stage for renewed buying interest.

Case Studies: Bringing the 3/20 Scan to Life
To illustrate the practical application of the 3/20 stock scan, let’s explore a few case studies:

SNOW
A 320 occurred on 1/22, signaling a potential entry. The subsequent pullback offered an opportunity to buy near the eight-day EMA.

SHOP
Another success story where the 320 paved the way for a subsequent pullback, providing an entry point around the 81 area.

APP
Despite an impending earnings report, a strong 320 signal on APP highlighted a potential buying opportunity after a tight range session.

PLTR
Featuring a massive gap, PLTR showcased how a buy over the prior day’s high can capitalize on the 320 momentum.

MDB
An example of a stock with a big volume move up, MDB’s breakout above the 440 level following a 320 made it an attractive pick.

The Go or No-Go Situation
Rick introduces the concept of a “go or no-go” situation. Once a stock breaks out with volume and aligns with the 320 criteria, it’s time to monitor closely. The 320 acts as an alert, and subsequent price action dictates the next move.

Closing Thoughts: Simplify and Succeed
In wrapping up this enlightening journey into the 3/20 stock scan, Rick Pedicelli emphasizes its simplicity and effectiveness. This powerful tool aligns stocks with strong price and volume actions, typically above the 50-day moving average and with prices above the eight and 20-day moving averages.

Give It a Try and Elevate Your Trading Game
Ready to embark on a journey of mastering explosive stock moves? The 3/20 stock scan awaits your exploration. Simple, adaptable, and potent, this tool can become a cornerstone in your trading arsenal. Give it a try, refine your approach, and witness the transformative impact on your trading success.

Don’t be left in the dark; check out the video now.

Join the MTG Tribe Today
For in-depth analysis, top swing trade setups, and a supportive community dedicated to successful trading, visit MorpheusTrading.com and click on stock picks.

Join the MTG Tribe today and trade what you see, not what you think. Elevate your trading journey with Morpheus Trading and Rick Pedicelli’s wealth of experience.

Elevate your trading journey with Morpheus Trading and Rick Pedicelli’s wealth of experience.

If you found these insights valuable, hit that like button and subscribe for more in-depth analyses.

For precise entry and exit points on top swing trade setups, visit MorpheusTrading.com and join our MTG Tribe. Thanks for joining us on this journey, and until next time, happy trading!

Join the exclusive MTG tribe in uncovering potential profit opportunities with a proven swing trading strategy.

Thanks for joining us on this journey, and until next time, happy trading!

Stay Connected:

Stay Informed:

The post Mastering Explosive Stock Moves: A Comprehensive Guide to the 3/20 Trading Scan Strategy appeared first on Swing Trading Blog | Trading Strategy Articles | Trading Tips.