Tuesday, October 31, 2006

Dummy Trade of the Day - NVIDIA Corporation (Public, NASDAQ:NVDA)

NVDA is always front and centre on my trading screen, so I didn't have to run a gapper scan to catch this setup. The OR was wide and bullish. The next bar was NR with a long upper shadow followed by a bearish engulfing bar. The fourth bar came in deep but reversed forming a long lower shadow and signaling that the pullback was over. As soon as price took out the high of the reversal bar, I went long. I knew we had resistance coming in at $34.50, but volume was very bullish and I decided to hold on for a bigger gain. Price rallied into resistance and reversed, pulling back to the OR high, after which it took off again, closing on the 50% Fibonacci extension.

Celgene (NASDAQ: CELG) was from a gapper scan. My entry was a low risk dummy entry, after what I thought at the time, was a proper consolidation of the initial gap up. As soon as I entered at $53.00, the stock took off and I thought I had another winner. Unfortunately, after tagging $53.30, CELG pulled back and I eventually was stopped out. In retrospect, price was too far above the rising 10 period MA on my entry. Price and the short-term MA can never get away from each other for very long. I re-entered CELG in mid-afternoon after price carved out a higher low and crossed over the 10 period MA. This second trade covered twice the original loss.

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