NVDA: The Gift that Keeps on Giving

Nvidia shares have experienced a meteoric rise, so all eyes were on its earnings report last week. Investors were not disappointed, as NVDA reported explosive growth plus a highly anticipated stock split.

Why Stock Splits are Exciting

NVDA’s reported 10:1 split will take place on June 10th, less than two weeks away! This event is so exciting for a few reasons. Stock splits generally:

  1. Allow investors who previously couldn’t afford shares of stock in a company the ability to purchase them, therefore bringing more buyers into the marketplace.
  2. This also impacts the pricing of the stock options, bringing it down. Lower-priced options allow more investors to trade an already highly traded ticker, potentially bringing more volatility and action into the name.
  3. It allows investors to accumulate more shares of stock at a lower price or turn the stock they already have into more shares. This is particularly beneficial if your goal is to grow a stock portfolio that you’d like to use to trade options with, for example, selling covered calls against your shares. Now, I can’t say NVDA is a great candidate to sell covered calls on at this moment with its explosive growth, but collecting lots of 100 shares over time would allow the potential of selling covered calls for income in the future.
  4. The news media heavily covers the exciting stock split news, leading to more awareness, volatility, and potentially more opportunities through stock movement.
  5. The excitement surrounding the above generally leads to the stock trading higher pre-split in anticipation and lower post-split as it becomes more affordable. This is a beneficial situation for both investors and traders alike, and it’s also a typical trading pattern.

NVDA: Another 5% Move Today

So, how is NVDA trading? NVDA was trading around $950 before the earnings; post-earnings, it gapped up by about $75 and then kept going. Today, three days later, NVDA is up another 5% and has reached a new, all-time high of $1124.

The stock has blown past my ‘easy’ targets and is primarily a momentum move. Momentum moves can generally be followed until the momentum dies, which usually occurs with a gap lower overnight, making it a little challenging to time as a swing trader. That being said, the next targets I’d use are $1200, which is a key psychological value, and then $1326, which is the 2.618% extension on the weekly chart.

Trading in the News

I discussed this and more with Charles Payne on Thursday after Nvidia reported earnings. Learn more below:

 

P.S. To join us in the Simpler Central trading room, click this link to learn more!

 

 

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