Nvidia is set to report earnings Wednesday after the bell and to say this is the Super Bowl of earnings reports is an understatement. There has been so much talk about the exorbitant amount of cap-ex spending that needs to be done by companies not just in the technology sector to position for the AI revolution. My gut feeling is that Nvidia (NVDA) will surpass those expectations and the stock could move to new highs, but earnings are always a crapshoot.
We do have the overhang of the delayed Blackwell chip that could act as a drag on the report or any other data point that investors might get hung up on that could cause a sell-off in the stock. In this piece I would like to first take a big step back and look at the technical picture of this company and remind us not to lose sight of the forest for the trees, and then I'll get into my playbook to handle our positions in NVDA in our various managed accounts. This is arguably one of the most historic stocks ever and from a technical position I see this stock has another 50%-to-75% upside before I see any significant resistance coming into play.
Using a basic Elliott Wave count from the October lows I see the first of three trend waves (labeled 1,3,5) traveling 365%. The 2nd trend wave labeled wave (3) traveled 258% to June of this year. The final trend wave labeled as wave (5) could meet the pair of Fib projection levels forming both a target as well as a resistance zone of $199-$234, approximately 70% higher from here.
Turning to smaller time on the daily chart I've outlined two factors to consider for Wednesday. Since the August swoon and the trip below $100, NVDA has recovered all the way back to what I consider the retracement of last resort at $128.12 .
If we can get a sustained move this level then the all-time highs are a strong possibility. Turning to the options market the expected move is roughly $12 higher or lower from current levels that I've labeled in blue and red. My game plan for the shorter-term active 'fast money' account I manage is to carry my position size into the report, but deploy some hedges.
I plan to sell the $140 calls that expire this Friday August 30th, currently trading for $2.50, that will be a credit. Against that I plan to buy a put spread below us to offer some protection using the credit collected on the call sale.
Buying the $115 put, selling the $105 creates a $115-$105 put debit spread for a cost of $1.55. This protection strategy gives us a cushion down to the $105, which would be a full 2 standard deviation move lower that would require some highly negative news to send the stock down to that price.
On the topside we'll also be capped on a move above the +1 standard deviation and the all-time highs. It's a risk I'm willing to take with some attention on this report. For my longer-term more slowly managed growth account, I'm currently carrying a 6% allocation of NVDA, below the 6.
59% allocation in the S & P 500. I have 2% cash sitting in short-term treasury ETF's that I'm most likely to deploy into NVDA to overweight heading into the report because regardless of how the market reacts to the earnings report, I think this stock is in a historic bull run and should continue to move higher in the coming six to 12 months. -Todd Gordon, Founder of Inside Edge Capital, LLC DISCLOSURES: (Gordon owns NVDA personally and in his wealth management company Inside Edge Capital.
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