BIDU And NVDA

I meant to follow up yesterday on Monday's "BIDU: Patterns, Patterns, Patterns," post, but forgot since I posted on several others. The Bear Flag target of 116.02 got MADE in Thursday's trading with a little extra on the downside. The low was 114.14.

Remember that when targets get MADE, that doesn't suggest anything about what's next for the stock (or index). It simply tells us that The Bears were successful in achieving that particular target for that particular pattern. The Bear Flag is done. For that reason, it's always a good idea to "take profits, or at least 'some' profits, when targets get MADE." In this case, on short positions.





From May 4, on NVDA:

"I wanted to get long NVDA if The Bulls could have taken out the top of the Falling Wedge in the intraday chart that we looked at yesterday morning. That would have been a "continuation pattern" breakout to the upside, giving some confirmation of the Double Bottom breakout in the daily chart.

Instead, it was gap down, below support? In a word: YUK."

Update:

The Double Bottom was a Fakeout/Breakout. NVDA traded above and below 19.64 on three occasions, rendering the March 28 pivot (19.64) of the possible Double Bottom meaningless.

On Thursday, NVDA broke down below the recent trading range in earnest. In the short-term, the stock is oversold after the June waterfall decline, but we know that "cheap can get cheaper."

Initial resistance on any rally is 16.83 - 17.12, which is the area of the triple lows of the recent trading range. Everyone who bought NVDA in 2011 and who hasn't sold now is holding a losing position. Many of them will want to sell on rallies.

Additionally, rallies to broken support are invitations to the shorts to "sell short at resistance." For an example of that, look at yesterday's chart of US Steel (X). The Bulls tried THREE times to get back above broken support at 43.85, failed on all three attempts, then the Double Top target of 41.43 got MADE.

To establish a downside target in a situation like this one in NVDA, I use the more conservative of the two highs and the most conservative of the three lows, so:

20.44 (high) - 17.12 (low) = 3.32 points of downside.

17.12 - 3.32 = Target: 13.80 IN PLAY, as long as NVDA trades below 17.12. Any trading above 17.12 is a "knuckle-biter" for The Bears.