As one might plainly see on this daily, year-to-date chart of Nvidia (NVDA) - Get Report , a pea seems to have rolled off of a cliff, only to hit a couple of ledges on the way down. Relative Strength is closing in on its weakest levels of the year. The MACD (moving average convergence divergence) suffered a bearish crossover back in early November, and has just gotten worse ever since. Money Flow? Yeah, that's going to leave a mark. After several months of pure and sizable inflow, There seems to be a little tuft of brown finally showing for the first time since early July.
Still these guys are the best, at least I think they are. I probably want to buy some back based on my own technical analysis, and then also buy some back once I know how tax reform will end up treating the firm. Rotations do force me to caution myself against aggression.... so maybe we'll do this in three tranches. I am currently long about 25% of what I would consider a full deployment of capital in this name.
If you play the Fibonacci game -- and really, nobody completely ignores this -- there are two ways to go. If one recognizes the lows of late June/early July as the start of the most recent uptrend, then you've already reached a 50% retracement (The blue Fibs), and have seen the start of a rebound. If you choose the post-earnings lift-off of early May as your spot, then you're thinking that you may see some help in the $171 area (the red Fibs), which would be the initial retracement level of 38.2%.
My personal thought is that I can wait for the low $170s. I can be wrong. If I am, then I will adjust accordingly. One thing to always remember gang, is that it is not so much whether you're right or wrong. It's how you react when you are right or wrong. Some of the most successful traders I have ever know were wrong more often then they were right. They cast a big net, and then focused upon the best fish. NVDA, even though now technically weak, and fundamentally difficult to assess (thanks to tax reform), is still a good fish.
(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)
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At the time of publication, Stephen Guilfoyle was long NVDA, although positions may change at any time.