Trading the Tech Stock Sell-Off for Opportunity

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Technology stocks have been front and center over the past week – especially Wednesday and Thursday.

Starting last week and leading into the Federal Open Market Committee (FOMC) meeting that wrapped Wednesday, technology stocks were getting bid up.

Even as the FOMC announced accelerating its bond taper (slowed bond buying) by double – effectively ending the bond buying by March of next year – and that it expected to make three hikes in its target rate for Fed Funds (the rate charged by member banks to lend to other member banks), technology stocks began to take off.

 

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S & P Information Technology Index Price – Source: Bloomberg
 

And take off is an understatement. Within minutes these market leaders soared, and many stocks that once looked attractive no longer looked set up for a buy.

In fact, I wanted to buy many technology stocks – but I took a breath, did my seasonality research via my Money Calendar, dove into my detailed price charts, and got ready for a pullback in tech.

Essentially, I wanted to BTFD – or Buy The Friggin’ Dip, as they say.

And yesterday, my patience paid off.

The sell-off that happened in the stock market – led by the previously soaring technology stocks – set up a great trade opportunity that I shared with Fast Fortune Club members… and that I want to discuss with you today.

 

The Trade I Made on the Tech Sell-Off

One of the tech stocks that I have been following I really wanted to buy this week, but the run-up to Wednesday made it too expensive to jump in.

But my patience and discipline – as well as my research – paid off Thursday.

The stock is Nvidia (NVDA).

Nvidia is one of the global leaders in graphics processing units (GPUs). These processors are must-haves for video and online electronic games that need hype-fast and data-rich processing for action and other games.

And the company’s GPUs are also in processes for a host of other industries, from research to industrial and even for governments.

In addition, since I work in the cyber coin market, GPUs are also integral for coin mining – as they work well for solving the required algorithms to generate new coins.

Last quarter, Nvidia’s revenue soared by 50.30%, so fundamentally not too shabby.

I wanted to buy into this stock – but as I said earlier, I only wanted to do it at the right price.

And late yesterday, we got that dip, allowing for a trade in NVDA.

 

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NVIDIA Price – Source: Bloomberg
 

But along with the stock’s fundamentals and technicals, I liked NVDA for another reason… Seasonality.

Over the past 10 years, this has been a historically bullish time of the year for NVDA.

You could say the shares enjoy a bit of a Santa Claus Rally, and tend to move higher heading into mid-January. Of course, there are no guarantees in the game of trading, but I like having history on my side, which is why I created my Money Calendar tools (found on the TG Suite app, along with your Power Profit Trades Morning Report).

 

NVIDIA Historic Profit Performance – Source TomsOptionTools.com
 

The pullback set me up to initiate a vertical call spread on NVDA.

I shared details of my trade idea with the members of my Fast Fortune Club, but it involved buying to open a call option, and then lowering my risk of entry (and capping my potential reward) by simultaneously selling to open a higher-strike call in the same expiration series.

For more info on this strategy or any of my proprietary tools, call our VIP Team at 1-888-384-8339.

The takeaway: When there’s a market move you feel you missed, be patient and don’t chase or overpay. Only strike when the entry point suits you, and try to keep history on your side.

Have a great weekend!


Tom Gentile
America’s #1 Pattern Trader

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