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NVDA: Why I’m Betting Against This Market General


Yesterday, I went long NVDA puts, meaning I’m betting against one of the true Generals of the bull market.

So I’m going to show you:

  1. How I used the Square of 9 Chart to Make My Short Case
  2. Important Levels you Need to Watch in the Stock
  3. What the NVDA Action means for the market.


Yesterday morning, I said NVDA should find resistance as it tested the open from the big reversal from June 9 near $165.

Typically, after a high, a stock will have a return rally to test the prior pivot.

June 9 was a Friday options expiration and this $165 strike may be pivotal again going into the weekend.

The key level on NVDA is $162.

On my Square of 9 Chart, $162 is straight across and opposite the April 13 low of $95.

It is not 180 degrees opposite.  It is 540 degrees, as shown in a Square of 9 from yesterday.

Click to enlarge

In other words, from $95 to $162 is 1 complete 360 degree revolution (1 full square) and an additional 180 degrees, for a total of 540 degrees.

I discovered the importance of 540 degree moves by studying all the swings in the SPX going back to 1941.

NVDA pushed through $161/$162 but closed below that level.

It will be important to see if NVDA closes below $161/$162 on the important Friday weekly closing basis.

The close is what traders take home with them on the dailies.

But the weekly is double important, because that gives us the intermediate trend for swing trading.

Some traders will say this is not exact enough for them.

But the market is not a fine Swiss watch.

Given the millions of shares and millions of market participants, it is nothing short of remarkable that the Square of 9 is able to define turning points within small fractions of time and price.

Some traders want the Wheel to be self-driving like a TSLA.

But the market is more like a Picasso than a Rembrandt.

As this 10 minute NVDA chart for the week shows, NVDA set an Opening Spike High from $166 on Thursday and reversed, trading down to $158.75 in the process.

Once NVDA traded below the opening range, it triggered what I call an ORB (an Opening Range Breakdown) below the first 30 minute range.

Notice that NVDA did not trigger an up ORB on Thursday, the high occurred in the first 30 minutes.

When the opening range was snapped to the downside, NVDA accelerated, breaking a little trendline for the week before backtesting the break point.

90 degrees down from Thursday’s high ties to $154 and the $155 strike.

If NVDA sees downside continuation below Thursday’s low and the $160 strike, it sets up the possibility that it may be magnetized to $155 on option expiration Friday, or for a Monday opex hangover.

A second failed backtest of the little 10 minute trendline, especially on an opening pop up, puts that notion squarely in the crosshairs.

Conclusion. Because NVDA is a name that embodies the heart and soul of speculative sentiment, it’s action on this possible test of the June highs should offer a lot of information about the position of the market.

When the generals turn tail, usually the troops cut and run too.

So watch NVDA — it is running this market.

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1 comment
Shawn Khalilullah says July 21, 2017


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