9/18/17 – In videos, blogs, and articles, you hear traders talk about why they like trading certain stocks. Given the right market conditions, these stocks tend to trend all day long with multiple potential entry points. NVDA is one of my favorite stocks to trade for this particular reason.
Before I get into why I felt this stock would run, let’s look at what happened on Friday. On the daily chart below, you can see it opened at about $172.86 and closed at $180.11. You can also see with an open price of $172.86, the only time this stock traded above this level was on August 8, 2017. Therefore, it was gapping over a month’s worth of daily ranges.
Watching the pre-market action, on the 1 minute chart below, you can see the stock kept climbing higher until a few minutes before the open. In addition, the high of the pre-market was above yesterday’s range and above the highest price over the past month. Therefore, if NVDA broke the pre-market high, given what we know by studying the daily chart, there was a good chance this stock was going to run.
On the 1 minute chart above, the first aggressive entry was the break above the pre-market high, which was $173.48. The 2nd entry was a break above the high of the 1 minute bar (circled above). The 3rd entry was the break above the trend line around 9:37 AM ET when we had 3 bars with lower highs and lower lows (see arrow on chart). In addition, you can see prices never closed below the yellow line, which is a 10 simple moving average.
On the 5 minute chart, the first bar was very large, so the break above the high of the 5 minute bar was a little risky. However, this was the 4th potential entry. Because the bar was very large, I would have waited for a pullback pattern, which we got around 10:25 AM ET. That was the 5th potential entry (see arrow below). Throughout the day, there were other potential entry points, such as breakouts above the daily high, other pullback patterns, etc. if you missed the ones within the first hour of trading.
One thing to mention about trading NVDA at the open, this stock tends to have a large bid/ask spread. As time progresses throughout the day, the bid/ask spread narrows. Therefore, before trading any stock that is new to you, make sure watch how it trades for the first couple of minutes at the open and if you want to trade a stock with a large bid/ask spread, make sure you use limit orders and/or cut your normal share size down to compensate for the additional risk. On days similar to today, it helps to enter and exit your positions at multiple levels throughout the day. But, make sure you hold onto enough shares to let them ride all day to capture large movements.