To The Moon

 🌟🌟🌟In a market dominated by algorithms and rapid news cycles, technical indicators are our essential compass.  Today we break down 4 critical trading principles that help separate fleeting noise from genuine signals, and apply them to the current turbulent market landscape, including the recent action in NVIDIA.

The 4 Principles of Price Action and Momentum 

1.  Minor Breakdown : A Fleeting Pullback Opportunity 

Principle: A stock in a strong established long term uptrend experiences a brief drop below a very short term moving average (like the 5 day or 10 day MA).  It finds buyers quickly and resumes its upward path.

Example: $Micron Technology(MU)$  earlier this week dipped toward its 20 day MA before its blockbuster earnings report.  This was a fleeting opportunity.  Traders who added to their positions were quickly rewarded when the price reversed sharply higher.

2.  Minor Breakout: The Failed Struggle of Weak Rebounds 

Principle: A stock in a clear confirmed long term downtrend stages a weak low volume "breakout" above a minor resistance level.  It quickly reverses and continues its main downward trend.

Example: $Tesla Motors(TSLA)$  poked its head above a minor resistance level this week around USD 480.  However the move lacked volume and conviction , proving to be a "failed struggle" when regulatory news hit, sending the price tumbling back down.

3.  Excessive Negative Divergence : Post Oversold Rebound Potential 

Principle: Price makes a lower low but momentum indicators like RSI or MACD , make a higher low .  This indicates selling pressure is exhausting itself and a strong rebound is likely.

Example: Bitcoin exhibited this behaviour during its slide toward USD 84k level this week.  While the price made lower lows, the RSI indicator showed underlying strength was improving , correctly forecasting the sharp bounce that followed.

4.  Excessive Positive Divergence: Post Overbought Correction Looms

Principle : Price makes a higher high, but momentum indicators make a lower high.  This is a major warning of buyer exhaustion and that a significant correction is about to begin.

Example: $NVIDIA(NVDA)$  showed this vividly as it approached its all time high near USD 212 last month.  The price surged but the RSI indicator was simultaneously flagging a lack of internal strength, foreshadowing the current ongoing correction.

NVIDIA : Breakdown or Oversold ?

$NVIDIA(NVDA)$  has now decisively broken below its 5 day, 10 day, 20 day and even 60 day moving averages.  This action needs a clear interpretation:

Is it a breakdown sell signal?  Yes.  The break below the 60 day MA is a significant technical event .  The short to medium term upward trend is officially compromised and the bulls have lost control.  This is a clear signal for trend following systems to exit their positions.

Has NVIDIA reached an oversold condition?  Not yet.  Despite the recent drop, momentum indicators like the RSI typically need to reach levels below 30 to be considered technically "oversold".  NVIDIA has not hit that level yet, which suggests there is still room for further downside selling pressure.

The Verdict: The current action qualifies as a confirmed breakdown where sellers are clearly in control.  We may need to wait for an Excessive Negative Divergence to form (Principle 3) before a durable "oversold rebound" occurs.

Stay vigilant , manage your risk and trust the price action.

@Tiger_comments  @TigerStars  @TigerClub  @CaptainTiger  @Tiger_SG