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Trade of the Day: Two Ways to Play Nvidia Corporation (NVDA) Stock

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Shares of Nvidia Corporation (NASDAQ: NVDA ) have done very little through a multiweek lens despite an earnings report in the first half of August. While NVDA stock remains bullish in the near-, intermediate- and longer-term time frames according to my proprietary trend algorithms, from a trading perspective the stock's consolidation phase of late could ultimately resolve in either direction. Here are two ways to play the stock.

Trade of the Day: Two Ways to Play Nvidia Corporation (NVDA) Stock

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Before looking at charts of shares of Nvidia, however, we must gain some perspective on the broader semiconductors as a group and represented by the VanEck Semiconductor ETF (NYSEARCA: SMH ).

While the SMH ETF has had a couple of ups over the past few months, largely speaking it has been in consolidation mode since early June, while remaining in a well-defined up-trend.

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While the consolidation phase in recent weeks has tightened, as marked by the black lines, until a break in either direction occurs, from a trading perspective this is better to be waited out.

When I last mused about shares of Nvidia on Aug. 11 I offered that the stock looked near-term overbought and that dip buyers would be wise to wait for a strong bullish reversal to buy the stock. Thus far and since Aug. 11, NVDA stock has essentially trotted sideways and thus, in my eye, no good buying opportunity has arisen yet.

NVDA Stock Charts

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Moving averages legend: red - 200 week, blue - 100 week, yellow - 50 week

On the multiyear weekly chart we see that NVDA stock as a result of the year-to-date rally and despite a two month consolidation phase remains trading at the very upper end of its bullish trend. Meanwhile the MACD momentum oscillator at the bottom of the chart is also near historic "overbought" readings. While none of this makes the stock bad, in my book this requires more patience for a better trade setup.

Click to Enlarge

Moving averages legend: red - 200 day, blue - 100 day, yellow - 50 day

On the daily chart, we see the recent tightening of the consolidation phase in NVDA stock even clearer. Note that the yellow 50-day simple moving average has been holding as support since May and also coincides with the lower end of the consolidation zone. A break and hold below the $160 area could open up a leg lower in the stock toward $140 as a next downside target.

On the other hand, should NVDA stock stage a solid bullish reversal and break and hold above $170ish and thus resolve out of the consolidation to the upside, a next leg higher toward $190 and $200 could unfold.

Bullish and bearish reversals are an integral part of profitably navigating the stock market and for those unfamiliar with these strong bullish reversals, I will be holding a special webinar today Aug. 30 for InvestorPlace readers on how to find high-probability trade setups using these powerful moves. Register HERE.

So, the name of the game for NVDA stock from a trading and active investing perspective is to remain patient until a move in either direction takes place, which in turn could set up a higher probability trade once again.

Check out Anthony Mirhaydari's Daily Market Outlook for Aug. 30.

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The post Trade of the Day: Two Ways to Play Nvidia Corporation (NVDA) Stock 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.

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