by Shane Ormond
On Jan 21, 2020
Now that the Chinese factory is complete (and just in time for a deadly virus outbreak), self-proclaimed “Buff Mage” Elon Musk is turning his attention to Germany, where colonies of bats and unexploded World War II bombs threaten to undermine investor confidence. (Those are not metaphors.)
On Friday, we looked at a monthly chart of Dick’s Sporting Goods Inc., noting the stock has been on a bullish run since September.
Today’s Chart of the Day is a Keltner Channel chart for NVIDIA Corp. (NYSE: NVDA).
NVIDIA Corporation operates as a visual computing company worldwide. It operates in two segments, GPU and Tegra Processor. The GPU segment offers processors, which include GeForce for PC gaming and mainstream PCs; GeForce NOW for cloud-based game-streaming service and Quadro for design professionals working in computer-aided design, video editing, special effects, and other creative applications. And Tesla for artificial intelligence (AI) utilizing deep learning, accelerated computing, and general purpose computing.
Now, the Keltner Channels serve as an overbought/oversold indicator. When the daily stock price is trading above the Upper Channel, it signals that the stock is overbought.
When a stock becomes overbought, it normally declines in price as the inevitable profit taking occurs. Those price retracements are actually buying opportunities for us.
Below is a daily price chart for NVIDIA Corp. along with the three Keltner Channels (Upper, Middle, and Lower).
The NVDA daily price chart shows that NVDA is in a strong price uptrend and recently became overbought many times as the stock traded above the Upper Keltner Channel (circled in blue). As you can see, after trading above the Upper Channel in all scenarios, NVDA experienced a pullback.
Yet, even though NVDA experienced the pullbacks, in all cases the stock continued to rally afterwards.
If you want to participate in this rally, where is the best place to enter?
We use the Keltner Channels to help us select a lower-risk entry point.
A Keltner Channel “Buy Zone” occurs when a stock is trading below the upper Keltner Channel. Once the daily price is trading below the upper Channel, it signals a buying opportunity.
Maximizing Our Profit Potential
If you had purchased NVDA shares when NVDA entered the ‘Buy Zone’ around August 5th, you’d be up 58.74% on the stock by now.
Knowing that NVDA shares are continuing to rise, experience pullbacks, and rally again, we’ll be paying attention to future pullbacks in order to get in at the lowest entry point to catch another nearly 60% profit.
Additionally, we’d like to talk about how a previous Chart of the Day stock has done…
On November 18th, we highlighted Brown & Brown Inc. (NYSE: BRO), noting that BRO had been in a strong bull trend.
If you happened to have purchased BRO shares on that day, you’d already be up 6.28%.
But… if you had purchased the right option contract, you would be up 56.94% in less than five week’s time!
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Editor, Chart Of The Day