I thought we could all breathe a sigh of relief when Nvidia’s earnings were announced. Few could have predicted the roller coaster that was about to unfold. I discussed the significance of the results and the important levels to focus on with Brian Sullivan at “Power Lunch” earlier in the week. Now that we’ve seen how things unfolded, let’s focus on how to trade stocks. When the results were released, the stock achieved something it hadn’t been able to do in the past two years and sold off against the numbers. Historically, stocks have traded at or near their highs at the time of announcements, and then rebounded at the time of announcements. NVDA 3M Mountain Nvidia, 3 Months Thursday’s case shows a recent peak-to-trough decline of nearly 12%, with a slight reversion to the 50-day moving average. Strictly speaking, there was reason to be optimistic, and basically the news was great and the guide was great. Things looked rosy from the start gate. Watch the gap… Traders were closely monitoring Thursday’s opening gap. The stock price started at $195.95 and peaked at $196. Then it reversed. NVDA 5D Mountain Nvidia, 5 Days We’ve seen Nvidia stock rise significantly in the past following strong financial results. Back in late August, the stock rose 6.6%, trading a nickel higher before giving back all of its gains. Obviously, how we closed on the balance sheet date was important. On Thursday, this gap closed and we traded lower, forming a bearish engulfing candle, which does not bode well for the coming days. There was hope that Thursday’s opening differential would not only be maintained, but that it would start to climb back to highs around $210. That plan will be put on hold as we reassess price trends from Thursday. Looking at the Momentum RSI, we did not see a positive pushback above the midline that would have been a bullish turn. We are currently measuring the lower bound of the oversold level at 30. Historically, anything under 35 was a buyable deal in NVDA. It has only been oversold once in the past three years. The next phase is to find stocks to consolidate. In the three-year chart above, you can see that there was a period of consolidation followed by a period of great profits. See August 2023. The stock is expected to trend sideways around its 50-day moving average from now on as the rally gains momentum again. Resistance lies at Thursday’s high of $196, and support lies near $175. Given its history of sideways price movements following great performance, we expect it to take some time for the stock to return to an upward trend. Downside Risk As a former trader, I am always thinking about the worst-case scenario and what would happen if something changed. NVDA shareholders have experienced such volatile price movements in the past. Thursday was a very frustrating day, but long-term traders and investors should just sit back and relax. If the price falls below the support, a further decline to the 200-day moving average of $153 is possible, which would signal a steeper market decline. We’re riding on strong earnings and guidance, so we don’t see that working out. History has shown us that if there is a crack, it is a great buying opportunity. For those like me who were hoping Nvidia would take on Atlas and hold onto this market, I found Atlas getting a shrug. On this day, the Bitcoin crash and Fed uncertainty were too much for Nvidia to handle. Disclosure: (none) All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliate companies, and may have been previously disseminated on television, radio, the Internet, or another medium. The above is subject to our Terms of Use and Privacy Policy. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The Content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Click here for full disclaimer.
