Feb 21, ES Plan and Missal: The Top 5.5%

Discount pricing.

Image 1. NVDA CEO Jensen Huang.

The title is a reference to NVDA’s market cap as a percent of the NASDAQ index. Even after a recent sell off it’s still larger than the combined GDP of Spain and Portugal.

If you think that’s ridiculous, it is.

That doesn’t mean the stock is overpriced, that’s a function of whatever buyers are willing to pay for it, and sellers what they will sell for it. But what is for sure is that the stock (and just a handful of others) have an outsized impact on the indices. In covering data events this week in the Weekly Outlook, I overlooked to mention NVDA earnings Wednesday. Was the market ‘front running’ a potential selloff with a slight correction on Tuesday?

Minister’s Missal

My Tuesday premarket B scenario was spot on, so I won’t cover in detail what I posted in my feed this morning. In sum: context is king. Buyers failed to close the gap at open after a correction of net short overnight inventory, and sellers stepped in exactly at the ETH VAH. These exacting references are once again indicative of very short-term traders. We then proceeded to my two main lower targets, finding bids a few points below my ‘gate’ 4972 (a prior NPOC).

Image 2. Thursday low at RTH VWAP SD2

Buyers then corrected into close following a renewed initiative attempt by sellers in M period, closing the day near VAH (but near daily balance VAL). The action left a ‘b’ shape profile indicative of absorption however sellers took a lot of inventory home. The weekly is in balance and I consider the daily in balance as well.

Image 3. Putting a four day balance in perspective

Price Action Analysis

The action at the lows was a textbook case study of exhaustion. Note on the footprint the seller attempt to initiate below 4972 - a level we had on watch. Notice the blue prints on the bid side of the footprint with “x 0s” (the left side)? That is a sign of no remaining sellers - the zeros indicate a vacuum of offers above.

The principles of absorption, exhaustion, and initiation are visible on both footprint and more conventional candle charts. I share both below.

Image 4a. Footprint analysis of Tuesday lows

Image 4b. Candle cart analysis of Tuesday lows

Wednesday Plan and Levels

Pivot 4998. This is the D period high and Tuesday IB mid, and more importantly, the selling tail above. Sellers want prices (and time!) below 5000, as well as a defense of Tuesday’s high to engage daily OTFD which can see momentum build in the favor. Especially on the break of the PDL.

Buyers at a limit want to defend 4981 where we saw heavy activity on Tuesday, with an aim to break the PDH targeting a gap fill.

a) Buyers spending time above pivot early on target LVN 5012 (and gap close) into 5027 and 5043. Further above is Friday high 5054.

Buyer LIS 4981.

b) Preferably early defense of the pivot targets a break of 4981 - momentum below can aim for PDL 4968, finally weekly level 4956 which is expected to be defended.

c) VIX over 16.55 can release selling volatility, while breaching 14.70 supports the buyers. TSLA is the weak one out, needing to reclaim 195 for a shot at 200, below 190 can see an attempt at 187.50. can stay bid over 195, although dips are possible. Similarly AAPL needs to show strength over 184 - a key level. Finally I won’t be betting on NVDA afterhours, however 708 is a key level to retake intraday with 719 and 730 above. I believe 682 is the level needed to hold on the downside.

Image 5. 4H TF, Critical ES levels

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