Market analysis is for me about probability. I can empirically test or even subjectively experience (because living it is just as useful as testing it ) certain conditions in the market and postulate probable outcomes from there. Part of this is even if one expects a 75% hit rate, then that means a 25% failure rate. I had one position only for the past month and it was a short spread in SPY. It turned out to be a loser and part of the 25%. That’s okay by me. The market did not go down, did not go up, it just went sideways. So ironically it was one of the very, very rare times where the resistance I sold in front of did its job, but the market just treaded water, and never declined enough to make a profit. What I did right was not keep adding shorts. Happy about that. And hence it bears repeating again that “flat” is a position, and patience is one of the best attributes you can bring to the market.
I want to add some insight to the NVDA situation. For those not familiar, the stock rose 30% on quarterly earnings after already having a spectacular rally for months leading up to the report. I have never seen a leading large cap stock perform like that off of a 13 week earnings cycle. I have no idea what’s next, but one of the things that I absolutely know for sure, is that stocks that generate this much upward momentum, are almost always a buy on a subsequent dip. Simply that much momentum does not dissipate quickly. Like a ball shot out of a cannon, it will reach peak velocity long before it eventually lands somewhere. So while NVDA may have reached peak velocity, there is plenty of momentum here that will keep it moving forward for a while. So the next dip can very likely be bought. It may or may not make another new high subsequent to that dip, but it will very likely give it a good shot.
Lastly, the attached chart of the Nasdaq shows why I will not buy here. Rather miss then chase! The chart shows Keltner channels and a Bollinger Band, all built around a 20 day moving average. When price is up against the Bollinger AND at the extreme Keltner it is historically a very poor place to enter. We simply must wait and see what the next pullback looks like.