Thursday, August 27, 2009

The Onion of Truth

Ugh...the trends moves on. Looks like there won't be an opportunity for a pullback buy. NVDA's basically at such a sharp ascending triangle that there's very little room for the trend ping-pong to continue. It can't break $14. It can't drop below the EMA20. I'm about to use 12.5% of my "money" to pick up some more UVACN (Mar 10 NVDA Calls).

Recall that when I made the trade, I had a lot of reasons for making the trade that would seem moot if my call was right. For instance, if the EMA20 is a trading signal, why does the MA50, which will be below the EMA20, even matter?

The answer is that no trade is 100% certain, but trades with lots of layers of certainty tend to take care of the trader. If you're not right about this contention point, maybe there's a larger contention point brewing that will build momentum if the first pattern fails. And so on and so forth.

On the other hand, NVDA just needs to stably break $14 to go into a little bit of a pop. It just needs to break $14. Not today, not four weeks from now. When it happens, the stock will have a tendancy to "fill the gap." The gap ends at $17, at which point UVACN will have $3 of intrinsic value and at least some time value left.

So here goes. The total is 12.5% of my cash on some options that were trading at $2.10 at the beginning of this post. The other 12.5% will probably follow shortly, but you'll get an update on it. I'll do the math regarding how many contracts I actually would have sought to obtain later.

Stay tuned.

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