Looking at a monthly chart of Nvidia (NVDA), it’s incredible how far it’s come in the last few years. But it also shows no signs of stopping. Prior to the last earnings report, we watched Nvidia stock closely for a swing trading entry. The patience and preparation paid off.
Swing Trading Example: Nvidia Stock
Nvidia stock is no stranger to SwingTrader. It was one of the first trades after the SwingTrader launch in March 2016 (at a split-adjusted price below $10!). It’s also one of the longest current holdings on Leaderboard with an initial entry back in April 2020.
For our most recent entry, we watched the strong move after a reversal in July that completed a cup base (1). As NVDA stock pulled back, the volume remained well below average (2).
At the same time, market indexes pulled back too. The Nasdaq composite fell to its 50-day moving average as Nvdia stock undercut its 50-day line (3). As we taped our “Investing With IBD” Podcast, our guest Chris Gessel noted the early entry setup offered by Nvidia stock.
When the Nasdaq composite bounced the next day, Nvidia stock got an extra boost from its earnings report and we added it to SwingTrader (4). The upside reversal undercut the lows of the previous day and then surpassed the highs of the previous day to create an outside day.
While Nvidia stock closed well off its highs, it still finished in the upper part of its trading range. Plus, it followed up on the strength the next day giving extra confidence in the buy decision (5). Leaderboard, meanwhile, took the opportunity to add to its NVDA stock position on those two days, increasing it from a half position to a full position (roughly 10% of a portfolio).
Selling Into Strength
We gave NVDA stock more room than usual before taking our first profit with a 7.5% gain (6). A few reasons were behind the decision. Nvdia stock saw huge volume accompany its bounce to the upside (7). Plus, its relative strength line quickly got to new high ground.
With over a 12% gain from our entry, we locked in another third (8) but the stock continued higher. At its peak (9), our gain was over 15% before it showed a downside reversal. For swing trading, selling the remaining Nvidia stock would be a justifiable decision. But since we already locked in a good portion of the profit we gave it a little room to see if it would go higher.
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Our final exit came as it fell below its 10-day moving average (10). Our profit at that point was still above 10% from our entry.
Here is the difference between swing trading and position trading. As a position trade, Nvidia stock hasn’t done anything wrong. Leaderboard maintained its full position.
For swing trading, we didn’t want to give up too much of our profit trying to eke out a little more gain. Especially since many growth stocks and the indexes started to look extended. For SwingTrader, we may stalk it again for another opportunity.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
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