Classic Bear PA on Long Term Resis: Break and trap patterns.
Updated
NVDA went into a large clear uptrend on the break of the 1.61 fib. This is something we see in Elliot wave uptrends.
If you follow my regular postings day trading you'll see me trading 1.61 breaks all the time and it's always when we get to the 2xx and 3.20 fibs I am most active in trailing my stops, because big reversals can come from these levels.
NVDA has a big bearish engulfing candle. Something generally positive for a bearish thesis. Personally, I'm not all that fond of shorting in these spots. I think it's always fair game we can retrace the last candle (Red) or even spike out the high (Blue) before a real reversal.
I know I'm going to bet on the red path and I know if that loses I'll bet on the blue spike out. if the market keeps going higher, I know I'll lose in these two spots. I don't mind losing in these two spots but I hate shorting the lows and then losing in these two spots on top of that.
This is why you tend to see me shorting into rallies. Because I don't trust price action signals to not screw me over a high percentage of the time.
But with all that said - strong follow on a bearish engulfing candle would be notable with the bear signal coming on the spike out of major resistance.
I'd be so much happier shorting NVDA on a spike out of the 4.23 fib.
At that point I'd think I'd seen all the risk for bears. If the bear trade was ever going to work, it'd have to work there. I'd not have to worry about final head fakes any more, just have to worry about being completely wrong (Which is better. Having to think about being 90% right and losing money is harder than just having to be aware you may be wrong).
At this point we can plan the break levels. Using an inversion of the 1.61 breakout strat used to aid the bull forecast at 500.
If a break, retest and re break of the 800 zone can be made - good chance we see NVDA trading significantly close to the 4.23. 570 or so min target on short.
The stop loss shorting here would be just above the high because the blow off risk to 4.23. Unfortunately, this can be subject to stop hunting in nominal spike outs with harmonics. It's a risk you always have to be aware of when shorting into early classic reversal candle patterns.
The breaking of 1.61 would be compelling for an important high made in NVDA. Conversely, if we hold there the case for 1200 or so is strong.
Pending how things look at that level I may or may not buy some 1100 calls. If I end up heavy in a short I'll probably be sure to buy them just as some common sense protection.
Chance of waterfall event under the 1.61. Just like the rally went parabolic when breaking above it.
If you follow my regular postings day trading you'll see me trading 1.61 breaks all the time and it's always when we get to the 2xx and 3.20 fibs I am most active in trailing my stops, because big reversals can come from these levels.
NVDA has a big bearish engulfing candle. Something generally positive for a bearish thesis. Personally, I'm not all that fond of shorting in these spots. I think it's always fair game we can retrace the last candle (Red) or even spike out the high (Blue) before a real reversal.
I know I'm going to bet on the red path and I know if that loses I'll bet on the blue spike out. if the market keeps going higher, I know I'll lose in these two spots. I don't mind losing in these two spots but I hate shorting the lows and then losing in these two spots on top of that.
This is why you tend to see me shorting into rallies. Because I don't trust price action signals to not screw me over a high percentage of the time.
But with all that said - strong follow on a bearish engulfing candle would be notable with the bear signal coming on the spike out of major resistance.
I'd be so much happier shorting NVDA on a spike out of the 4.23 fib.
At that point I'd think I'd seen all the risk for bears. If the bear trade was ever going to work, it'd have to work there. I'd not have to worry about final head fakes any more, just have to worry about being completely wrong (Which is better. Having to think about being 90% right and losing money is harder than just having to be aware you may be wrong).
At this point we can plan the break levels. Using an inversion of the 1.61 breakout strat used to aid the bull forecast at 500.
If a break, retest and re break of the 800 zone can be made - good chance we see NVDA trading significantly close to the 4.23. 570 or so min target on short.
The stop loss shorting here would be just above the high because the blow off risk to 4.23. Unfortunately, this can be subject to stop hunting in nominal spike outs with harmonics. It's a risk you always have to be aware of when shorting into early classic reversal candle patterns.
The breaking of 1.61 would be compelling for an important high made in NVDA. Conversely, if we hold there the case for 1200 or so is strong.
Pending how things look at that level I may or may not buy some 1100 calls. If I end up heavy in a short I'll probably be sure to buy them just as some common sense protection.
Chance of waterfall event under the 1.61. Just like the rally went parabolic when breaking above it.
Trade active
Bought some puts for April at 876. Don't want to short common because of gap risk.
Note
Follow up on this now we have a bit of a rally that would fit inside the simple correction pattern spoken of here. 
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