Here’s your trade on Nvidia ($NVDA) – August 28, 2024
Dan Fitzpatrick here at StockMarketMentor.com on NVIDIA ( NASDAQ: NVDA ) Wednesday.
The company reported earnings, and the numbers weren’t bad; they were actually really good. However, the market, as you should know unless you just started trading, the market was expecting really, really good numbers, it was already baked into the price and that’s what we got.
They announced a $50 billion buyback, and that’s not going to really butter anybody’s biscuit. But it does show you that they like their stock even at this price, otherwise, they wouldn’t be doing that. The bottom line is, this is a typical thing, where it’s not like, okay, what have you done for me lately?
It’s more like, yeah, yeah, yeah, I know what you’ve done for me lately. What are you going to do next? That’s where guidance comes in, and if they don’t offer just absolutely mindblowing guidance but instead start talking about overcoming issues, etcetera, etcetera. Then the Market is going to start selling. It’s like, okay, we’ll turn out the lights, the party’s over.
One of the dynamics here, I think that’s really important, I’m not going to show you a grid on it or anything like that. But the earnings and revenues, the top and bottom line, beats every quarter, have been monstrous.
However, the amount that they have been beating estimates has been dropping. And the amount that they have been exceeding the prior quarter’s numbers has been dropping. I’m talking about not growing, and Oh, it’s not growing anymore. No, no, no, I’m talking about, has it been accelerating? Has it been pulling away from the competition?
It’s still in the lead, the competition’s coming but NVIDIA ( NASDAQ: NVDA ) is still in the lead. Has it been pulling away like it has been or is it just keeping the pace? The Market doesn’t pay up for companies or stocks that are just keeping the pace. Pace cars aren’t really attractive, nobody wants to be driving the pace car.
Nobody wants to drive the pace car and nobody wants to buy the pace car. So if it’s looking like NVIDIA ( NASDAQ: NVDA ) is the pace car, even though it’s still head and shoulders above the competition, the Market’s already pricing in that this is head and shoulders above the competition.
We own a lot of NVIDIA ( NASDAQ: NVDA ) in our retirement account and there have been no changes to that, it’s down 7-8 percent today, who cares? I don’t care. But as a trader, I chose not to do anything before earnings. I did buy a little bit at about $120.00 after the number, and that’s kind of right at the 50-day moving average.
I’m comfortable holding that because the Options Market implied a 9.5, we’ll call it a 10 percent move. And sure enough, now it’s 7.73 up here, that’s about a $14.00 move. So I can expect another $4.00 to the downside, which would be about 114.00, so not too much further before the stock has gone outside of the Options Market estimated range.
Here’s a pro tip for you, when a stock, after earnings, breaks out above or below the option’s implied volatility, most of the time the stock’s going to revert. It’s going to basically correct it and say, Oh crap, I went too far, and then it’s going to come back the other way.
The point is, I think, even though I’m down a couple of bucks on this, I think the deal is, just wait and see how things shake out. This is not going to go down to 110.00 or 105.00 tomorrow. It’s just going to trade sideways for a bit.
So my suggestion is, don’t get all lathered up on this stock. I personally feel like the trade’s kind of over. It’s a great company, it’s a great stock to own, but it’s not a right here right now thing. That’s the way I would trade it. That’s the way our members are trading it.
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