All EYEs Seem to be on NVIDIA After the Bell

Tom Gentile

Posted in
Newsletter

By: Tom Gentile
May 29th, 2024

3 mins read

Originally published via our newsletter previously. Subscribe for early access!

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Today after the market NVIDIA Corporation (NASDAQ: NVDA) announces its recent earnings and revenue.

The anticipation of their earnings looks to be just as hyped as an upcoming Fed decision on interest rates.

NVDA’s share price is up 90+% so far this year. It stands to reason people are hanging on to what NVDA will say not only about their reported number, but their growth going forward.

It is believed by many NVDA has the worlds most advanced chips when it come to running AI, (AMD is deemed to be in second place to NVDA).

Will the market leader remain the market leader after their report today after the close? We all have to wait and see.

This stock is important as I see it because NVIDIA makes up just over 5% of the S&P 500 and it has accounted for nearly 20 5% of the S&P’s returns year to date.

ETF’s I am keeping an eye on along with the S&P are the QQQ, SMH and XLK.

NVDA’s earnings and outlook could add to or break market momentum.

Tom Gentile
C1P: Chief 1-Percenter


Market in Focus — SPY – SPDR S&P 500 ETF Trust

SPDR S&P 500 ETF Trust
SPDR S&P 500 ETF Trust
QQQ – Inivesco QQQ Trust (correlates to the stocks in the NASDAQ 100 list)
QQQ – Inivesco QQQ Trust (correlates to the stocks in the NASDAQ 100 list)

I have what I see as old resitance levels I would want to see hold as new support should NVDA drop the markets with their earnings after the close.

From the Desk of a CMT – Bearish Case Study Managed Through a Bullish Move

Sometimes being explicit in the title feels right. The Rate of Change (ROC) provided a good warning for the XLV bearish case study which consolidated for a few days before establishing a strong bullish move. 

Figures 1 & 2 recap the chart and strategy details for the case study on 4/25/2024 when the article posted, followed by the back-test performance for it when following the risk management rules.

Figure 1: Short-Term Bearish View of XLV on 4/25/2024
Figure 1: Short-Term Bearish View of XLV on 4/25/2024

Trending conditions were by ADX at 30 with a pause after rising and the bearish view was determined by declining short-term moving averages.

Figure 2: Case Study Details
Figure 2: Case Study Details

Position & Rules Recap

Case study spread:

  • Buy Calls to Open, 4 May 17 144 Call 
  • Sell Calls to Open, 4 May 17 142 Call

Each spread provides a $0.36 credit for a net credit of $144. The risk is $2.00 – 0.36 = $1.64 per spread, or $656

Exit rules for the case study with exits triggered:

  • Exit half the position after a close above the 20-day EMA: 5/6/24 close, exit 2 spreads on 5/7/24
  • Exit half the position after a close above the 50-day EMA: 5/7/24 close, exit 2 spreads on 5/8/24
  • Exit the full position after a close below the 200-day EMA: n/a

Since moving average move, get specific with price too:

  • Exit the full position after a close above 142 (expected loss): signaled 5/7/24, confirmed exit
  • Exit the full position after a close below 138 (expected profit): n/a

Timed exit:

  • Exit the full position by May 16th, the day before expiration: n/a, already exited

Max Risk @ $500:

  • Exit if the spread value moves to $1.61
Figure 3: Back-test Performance for Case Study with Exits on 5/7/2024 & 5/8/2024
Figure 3: Back-test Performance for Case Study with Exits on 5/7/2024 & 5/8/2024

Despite being completely wrong about the direction of the move, a loss of $156 was realized, which is a manageable amount. Money management (trade sizing) and risk management keep portfolio losses to a reasonable level so you can grow the account with your winners.

My instruction to you all is Find the rules that help you execute when you need to so managing risk is a habit, not a challenge.

Regards,
Clare White, CMT


Thank you, Clare!

Tom Gentile
C1P: Chief 1-Percenter

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