Yesterday I bought long Calls with Nvidia (NVDA). I was in them about an hour and jumped out with a $500 profit. Today I saw another opportunity and I just bought 10 contracts of the same Calls as yesterday.
Buy to Open 10 NVDA 1/17/20 $175.00 C @ $17.20 ($17,200)
Today the market opened down and NVDA followed along. In fact the stock is down over $2 from where it was yesterday afternoon. NVDA is one of the stocks I watch closely so this morning I was watching the candlestick chart. I was on the 1 minute candlestick chart. The chart with the 1 minute candles is used by day traders. I’m not a day trader but I watch the 1 minute and the daily candlesticks. The 1 minute chart gets a new candlestick every minute, and the daily chart gets a new candlestick every day. On both charts I have 3 Moving Averages. The 8 Day Moving Average (MA), the 50 Day MA and the 200 Day MA. This is a part of Technical Analysis. As a “Swing Trader” I rely on Technical Analysis more than Fundamental Analysis.
At the end of yesterday’s session, on the 1 minute candlestick chart, the 8 Day MA fell below the 50 Day MA. And at the open this morning the 8 Day MA fell way below the 200 Day MA. The bottom line is, if you are in long positions, you want the 8 Day MA above the 50 Day and the 200 Day MA’s. And you want the 50 Day MA above the 200 Day MA but below the 8 Day MA. This might sound very complicated but it really isn’t. The 8 Day MA should be the top line, then the 50 Day MA and the bottom line should be the 200 Day MA, for a long position.
This morning all these lines were in the opposite position. But watching them move as time went by it looked to me that the lines were moving in the direction to get into a more bullish position. When I bought this option it was not there yet but sometimes you have to rely on your knowledge to make a prediction when it comes to direction. At about 10:30am the 8 Day MA crossed to the north of the 50 Day MA. I bought this option a little before that so it’s moving in a favorable direction as I write. Sometimes it will go back and forth as the bulls and bears are fighting but with this I feel the bulls will win. At least long enough from to make 50¢ on my premium.
This explanation is taking longer than normal and I now see the 8 Day MA is well above the 50 Day MA and is approaching the 200 Day MA. I might be out of this trade before I send this post lol. When I bought this Call the stock was at $173.10 and as I write it’s at $173.70. I just hope when the 8 Day MA gets to the 200 Day MA it blows through it. Sometimes it will bounce off it and go south.
If you are set up with an account, take a look at the 1 minute candlestick chart and see if you can see what I’m trying to describe as I’m watching the stock movement. I’m trying to explain the movement of the 8 Day MA from the open to about 11:10am. At 11:10am the 8 Day MA is getting close to the 200 Day MA.
This trade gets a Risk Factor 3. Buying options with shorter time to expiration would get a RF 5 but this option goes out to 1/17/20. The extra Time Value makes this trade less risky. But remember, buying options is risky and you must know what you’re doing before you buy option positions.
You will probably get another post from me very soon with the sale of this Call.
Steve
The Options Coach