Double Negative Divergence

24 mar 2017

NVDA A potentially very bearish move may be coming for NVidia. There is a double negative divergence occurring for both volume and relative strength indicators. Could the $120 area be a triple top? Only time will tell. If the $120 area is retested, then either go short or buy puts for a time frame you think would allow for this trade thesis to play out (maybe a 30-day put option using any of the strikes from 115 to 120). You could also sell calls.

25 mar 2017

Nota

Another interesting interpretation.

The green vertical lines represent a distance of 30 bars (daily time frame).
The gray vertical line represents the time overshoot by 7 bars.
The orange arrow closer to the top represents about 3/4th the height of the head in the inverted-SHS, which is the measured move to where the $120 zone is.

The gold line represents both the neckline and throwback line. So it's possible to make profitable trades in both directions. For example, go long at the neck break, close at $120; then short at $120 (with protective calls maybe?) and close/cover at the throwback line at about $108. If the correction is real and this is truly a triple top, then target is $80 for covering (1st W is the most conservative structure here, $120-$100 = $20, then subtract that result from the low of $100, which gives us $100-$20 = $80).

Of course, this setup and trade ideas are extremely mechanical and textbook-like scenarios that will unlikely play out, but is definitely something to consider if it happens.