Samwise Quick Reference Handbook
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Sam, You had said on Friday that NVDA was likely due for a 7-10 point pullback. I’m not sure exactly what price it was, at the time. I think it was around $110. So should we be looking to buy some in the $100-$103 range?
So it’s more about where it is on the hourly RSI. Right now, Nvidia is at a 49-RSI. So it is back to mid-line. Sometimes that continues on until Nviida reaches oversold and other times Nvidia will bottom at the mid-line. It’s a crap shoot really.
Where it’s less of a crap shoot is when the stock reaches oversold. So if it does continue lower and eventually pushes to oversold conditions on the hourly, that sets up a high probability of a rally.
In MOST cases, when Nvidia pulls back off of overbought territory, there’s a tendency to see the stock reach oversold right after. So while mid-line might bottom it, it’s more likely to see a 30-RSI before bottoming.
So there’s a chance we could see a bottom right here where we are right now. A bigger chance that it falls to the low $100’s first.
If NVDA does pullback, it will do so generally between 7-10 points once overbought (~70-RSI and up).
Sam did mention this trend for NVDA in other older articles the past, for example:
◦ “We’re talking 7-10% pull-backs every time it reaches overbought.”
◦ “Nvidia tends to pull-back about 7-10 points off of its highs when it gets overbought”
◦ He also reiterated this point in the comments section last Friday .
Sam’s recent comment about the 7-10 pullback for NVDA was submitted when it was trading around ~111.30, but that is not when you would calculate the pullback from. You take the highest point when NVDA was overbought which was around ~111.92 (let’s round up to 112 for simplicity) at around 13:30 on Friday. Although not 100% guaranteed, if there is a 7-10 point pullback happening here, NVDA would be between 102 and 105.
Hey Sam! Can you clarify this? It sounds like it’s contradicting itself or perhaps it’s a typo (or perhaps I just didn’t understand ????).
There’s a typo. There’s an important “not” missing. See below
When Nvidia begins a new rally, it’s NOT uncommon to see it go to incredible extremes up to a 90-RSI even. What we didn’t want to see happen was close out at $111 and then watch the stock surge to $116-$117.
Also, note the chart posted after the update which shows Nvidia having previous rallied to a 90-RSI after bottoming in August for example. But that’s not the only issue. In October, Nivida rallied, reached overbought, barely pulled back 1-3 points and then surged ahead. It first reached overbought at $128 and continued on to $144 — 16-points higher.
The point of the post is that when we’re trading out of an intermediate-term position with the goal of reducing basis by repurchasing at a lower price, there’s a risk of the stock pushing into extremes. And that risk is particularly prevalent at the start of a new rally.
BULL REVERSAL
Stronggg Close
QQQ is still basically at the same place. From a day’s perspective, it didn’t really move much at all and just consolidated. One could argue that it’s leaning bullish but I think we will see more consolidation.
Hi Sam,
Could you elaborate on why this is true? Does the risk go up drastically due to the possibility of a double top?
Thanks!
Yeah, so the reason why that happens is due to the higher likelihood of negative divergence.
Markets love to top after retests. So if we get a moderate pullback, and then a rebound back to the highest and we don’t expand in momentum and or also make new highs than it increases the chances of it being a top
Also, a lot of tops happen in this exact manner. We rally to a high point, reach overbought pull back, rally back to the high point and then rally over.
But just because we reach a peak doesn’t mean that we’ll have a huge pull back or anything.
It could be a near term peak that leads to a 25 point pullback. It’s not always obvious what type of a pullback we’ll get.
Just that a larger pullback is likely to occur
What we need to see now is a strong push up that takes us way beyond the previous highs at $474.
How are we going to prevent missing the exit like what happened at $493, IIRC it fell a little short and we missed the whole thing.
Very weak push at $474
Yep. Hanging out at that resistance.
Whoa today the bulls and bears seems to be tired of pulling in their own direction.