Markets

Trade of the Day: This Nvidia Corporation (NVDA) Stock Dip Is a Buy

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

EDITOR'S NOTE: Sam Collins will return on Feb. 21

The king of momentum, Nvidia Corporation (NASDAQ: NVDA ), has been brought low following last week's earnings announcement. The earnings beat was good for an up-gap that lasted all of one nanosecond before sellers rushed in. Since then, NVDA stock has fallen some 10% amid heavy volume.

Trade of the Day: This Nvidia Corporation (NVDA) Stock Dip Is a Buy

Let's head to the charts to see if there are any clues to be had.

Is this the beginning of the end of Nvidia's bull market? Or merely a bout of well-deserved profit-taking following a rally for the ages?

On the bullish front, NVDA stock's recent descent has inflicted little, if any, damage to its overall uptrend. For all its fury, the three-day drop has merely returned the stock to its rising 50-day moving average, and all prior support levels remain intact.

On the bearish front, volume addicts can certainly point out the double dose of distribution accompanying the drop. These high-volume down days could certainly continue to weigh on the stock in the near term.

And, yes, NVDA did see a bit of slowing momentum during its last pivot high formation.

Source: OptionsAnalytix

But, really, until we see more significant price deterioration, buyers deserve the benefit of the doubt.

Embrace the Odds With This NVDA Stock Trade

If you think this dip is a buy and stock is your weapon of choice, then consider buying shares if Nvidia can take out Tuesday's high of $110.15. Those willing to dabble with derivatives could sell the Mar $100 put for around $1.27.

If the stock sits above $100 at expiration, you'll capture the max reward of $1.27 when the option expires worthless. If you're a willing buyer around the $99 mark, then you could ride to expiration and allow assignment if the put sits in-the-money. Your cost basis will be $98.73.

Otherwise, I suggest bailing if NVDA stock falls below prior support which, incidentally, also sits at $99.

At the time of this writing, Tyler Craig had no positions in any of the aforementioned securities.

Tell us what you think about this article! Drop us an email ateditor@investorplace.com,chat with us on Twitter at@InvestorPlaceorcomment on the post on Facebook. Read more about ourcomments policy here.

The post Trade of the Day: This Nvidia Corporation (NVDA) Stock Dip Is a Buy appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

NVDA

Other Topics

Stocks

Latest Markets Videos

    InvestorPlace

    InvestorPlace is one of America’s largest, longest-standing independent financial research firms. Started over 40 years ago by a business visionary named Tom Phillips, we publish detailed research and recommendations for self-directed investors, financial advisors and money managers.

    Learn More