How We Bagged Three Wins on Nvidia in Six Days

Nvidia (NVDA) needs little introduction after its recent massive run. The chipmaker was up over 180% at its peak earlier this year, largely due to the AI boom.

Yet it recently retraced sharply from its all-time high. It’s now up roughly 156% year-to-date.

Investors have been left scratching their heads, wondering if they should buy the pullback…

Meanwhile, my subscribers were busy trading in and out of NVDA for some rapid-fire profits.

Opportunistic Trader members picked up three winning NVDA trades in less than a week. Some only lasted a day…

The key to making these fast profits was to not get caught up speculating on which direction NVDA will go.

Instead, I let the price chart tell me what to do.

Today, I want to run through how these trades played out. That way, you too can profit from these kinds of opportunities in the future.

You just need to know how to find them…

It’s All About Momentum

One of the key things I follow is momentum. I’ve followed it for most of my 40-year trading career.

When buying momentum is steadily rising, chances are the stock price is rising too. And when momentum is falling, the price is likely falling too.

But one of the key signals to look for is when that momentum reverses…

When momentum switches back the other way, it can lead to some quick and profitable trades.

Just like our NVDA trades…

For our first trade (red line on the chart), we bought a put option to capture an anticipated fall. (A put option increases in value when the stock price falls.)

Our trade entry coincided with NVDA peaking on June 20 and reversing sharply lower that day.

That reversal correlated to a switch lower in the Relative Strength Index (RSI; left orange arrow) at the bottom of the chart…

Nvidia (NVDA)

Source: eSignal

With NVDA falling sharply, we locked in a 58.2% gain by selling half our position the following day.

We exited the remainder of our position three days later for a 73.8% gain. That’s a 66.0% blended gain overall.

The closing of Trade 1 coincided with another switch in the RSI – the middle orange arrow on the chart. This time it was to the upside.

This momentum reversal set up Trade 2 (blue line on the chart) on June 24 – the same day we exited the remainder of Trade 1.

Trade 2 involved buying a call option to capture an anticipated bounce. (A call option increases in value when the stock price rises.)

And again, the trade went our way right from the start. We closed out half our position the following day for an 18.3% gain.

Then we saw that the RSI’s up move was stalling. So we closed out the rest of our call option position that same day for a 22.5% gain. (We made an overall blended gain of 20.4%.)

We used that third momentum reversal (right orange arrow) as a setup for Trade 3 (green line).

This time was another put option trade.

And although this move was far smaller, we still captured a blended 8.3% gain in just a single day.

All up, we generated blended 66.0%, 20.4%, and 8.3% gains from three trades in less than a week.

Meanwhile, during that time, Nvidia’s stock price fell 10%…

Keep Looking for Momentum Switches

To be clear, by using options, we magnify both gains and losses compared to buying shares.

And because options expire, time decay erodes the value of your position. If the trade doesn’t go your way, your options can expire worthless.

So the key is to always understand your risk and adjust your position size appropriately.

But as we saw here, options handed us some solid profits in a short time.

The thing to watch for is when momentum is reversing, leading to a likely stock reversal.

You can also pair this signal with other indicators we regularly discuss as well, such as Bollinger Bands and the moving average convergence/divergence (MACD).

By identifying these key reversal moments, you can be ready to pounce (and exit just as quickly), like with these NVDA trades.

Once you’ve got your head around this concept, you’ll be able to apply this strategy yourself and regularly bank some tidy profits.

Regards,

Larry Benedict
Editor, Trading With Larry Benedict