BY MARK SEBASTIAN
May 20, 2024
REPLAY
TRADE IDEA
Each week, my team will give an overview of a stock. I’ll discuss fundamentals, Licia will analyze the charts, and AG will break down the volatility.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Trader,
This week, we are taking down the stock of all stocks….its NVDA’s market everyone is just along for the ride….but should you be on this bus? Lets break it down…
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NVidia (Ticker: NVDA)
Ok I admit it, I do not fully buy into the AI craze. It feels a lot like 1999 on some of these stocks.
However, there were some companies that came out of that era….this MSFT, AMZN, PYPL, and GOOGL. Yes there was Toys and Pets dot com, but out of the ashes of these events there are huge winners.
There are AI companies that are probably NOT going to succeed, but NVDA is not going to be one of them. The company right now is making money hand over fist…that will slow…but for the time being, the metrics of growth are VERY good.
Revenue growth is off the charts….earnings growth…same. Will it last…no it wont, but for right now, ride the wave.
With the stock reverse splitting soon, there is going to be a new wave of traders and investors jumping in.
Generally speaking, stocks rally into the split and then fall post split…that might not happen with NVDA.
The growth here is so high. With the increase in earnings and the somewhat lackluster rally overnight, the PE is actually going to drop. Relative to AMD, the stock is actually cheap!
I think NVDA in a year is going to be lower than where it is now…but in a month…probably higher
-Mark
Add Nvidia (Ticker: NVDA) to the list of many stocks that gapped on earnings right to my pitchfork support/resistance levels.
I called $1023 and it opened at $1020.28.
Check out this beautiful pitchfork:
As with any gap, we need to wait for a few days for the price to reveal itself.
If NVDA stays at this level look for a leg higher to $1120
Support is at Thursday’s lows $1015 and below there is $968.
Licia
NVDA will split 10 for 1
NVDA did knock the cover off the earnings ball this week. At this point it is hard to know how high it can run but I do know shorting it could send me to the poor house. The 10-1 split should provide an opportunity once the implied volatility drops post earnings. Owning options before the split will provide a 100-1 gamma opportunity which Mark, Andrew and Licia will explore on Monday.
We should see IV lows into a 10-1 split, which is generally a vol buying opportunity.
AI is providing skies-the-limit upside in stocks and in general I want to own options into that activity. I am writing this on the day after NVDA earnings but we should see some year lows in volatility and I will look to buy options. The only real question is do I buy them for the post split or not or calendar into the position.
Exciting times!
-AG
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Mark Sebastian
Founder & CEO, Option Pit
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