What’s the 3 Day Rule? Let’s look at Nvidia (NVDA). (May 11, 2017)
I want to look at NVIDIA ( NASDAQ:NVDA ) today. You can see what happened, unless you have been vacationing in a cave, if that is the case, welcome back. You know that NVIDIA ( NASDAQ:NVDA ) crushed earnings estimates, gapped up, and just kept going. The last time I covered this in the Free Chart video was a couple days ago when it was trading up after hours at 117.00. And I was saying, “With the stock up this much there is only $3.00 of upside before it tests this resistance. So don’t be buying right at the opening.” Again, it was trading around 117.00 when I was doing this and then of course the stock opened up a couple dollars lower than that the following day. But the analysis remains, and that is we are talking about risk here.
So if you are buying the stock here, and this is where resistance has been, that is a really small window to get some profits because you can see the stock pull back, think NetEase ( NASDAQ:NTES ). But if you just wait until the stock shows you that all this supply here is done, then you are buying it at 120.00, 121.00 and you have got better possibilities to make more money on a short-term basis and that is really where we are now. If we look at the weekly chart, look, this is a thing of beauty. This is a volatility squeeze that goes back several months, 5 or 6 months this has been trading in this range. Now it has finally broken out. Okay, everybody, those of you who don’t think it is going to go up to 150.00 in fairly short order, in the next month or two, everybody who doesn’t think that is going to happen raise your hand, and we are still waiting.
The bottom line is, yes, I think this thing continues to move. But on a short-term basis I think $130.00 is the top.
Our 3 Day Rule is this: The really smart money buys on the first day, of course the REALLY smart money bought here or way down even lower than that. But after earnings big money buys and the stock moves higher. And we know this is big money buying because of the volume here, that is the definition of big money and it is all green. So the big money buys on the first day, that is the smart money. The semi-smart money buys buys on the second day. That would be today, frankly, that would be us buying above 120.00. The stock moves up to 130.00 and that is where resistance is. Tomorrow, that is when the not so smart money is going to be buying this stock, because the feel like they are finally getting a chance. I am actually short this stock now and I am hoping that it falls back just a few more dollars.
I think this is a stock that, ultimately, you really, really want to own. That is your decision. Now taking action you are not buying it here at 126.50. You are going to wait, you are going to let the stock drift around a little bit. If it happens to pullback to 120.00 or so that is when you pull the trigger. Look, year on year they have got a growth rate of about 20 percent, that has been accelerating massively over the last year. Their revenues are like 45, 50 percent growth per quarter, so these guys are on fire. The whole artificial intelligence thing, it is graphics, it is all good. Buy NVIDIA ( NASDAQ:NVDA ), just not tomorrow.