NVIDIA: 4 Sell Signals in One Day
I came into NVIDIA's (NVDA) fourth-quarter earnings report expecting some level of disappointment.
I told Power Plays Options Subscribers the following on Wednesday:
I believe NVIDIA (NVDA) is at risk of a post-earnings decline so I am adding this position:
Long NVDA February 28 $120 Puts
These puts look good in the $2.75 to $3.50 area (or lower).
With Nvidia's decline off its highs and lower valuation, some believe a lot of bad news priced in.
I disagree.
We're still looking at a stock with a $3 trillion market cap and rosy expectations for endless long-term growth.
So to me, the odds favor a post earnings decline.
If this report isn't anything less than 100% shoot-out-the-lights perfect, we could see a hard drop below the $120 area.
Incidentally, this was the first put options idea in Power Plays Options history.
We did get the hard drop in NVDA stock below $120 — but it unfolded over the course of 2 days.
In fact, NVDA put in 4 sell signals the day after earnings (yes, 4 sell signals in one day) as you can see in this chart:
I love teaching my Sell Rules — and this is an interesting case study because you so rarely see so many hit in one day.
Here's how NVDA's decline happened so fast:
- Sell Signal #1: NVDA hit $135+ the day after earnings, a good spot to trim since the report was solid but not spectacular
- Sell Signal #2: the stock broke down through $133,73, a prior high.
- Sell Signal #3: NVDA went red and lost the 8/21/50 day moving averages
- Sell Signal #4: NVDA breaks the $124.44 prior low. It also broke the 200 day moving average here, though I didn't put this in the chart above to avoid it being too crowded.
And on Friday, we got that hard break below $120, with NVDA hitting a low of $116.41.
We cashed in the puts for Power Plays Options shortly after the open for a 62% gain.
I was tempted to roll the dice and hold the puts longer, but I didn't want to take the risk of them turning into a zero.
That turned out to be the right decision because as of the time I'm writing this, NVDA is over $122 and those puts are headed towards zero fast.
*Scott Redler Positions Disclosure as of 2025-02-28 at 10.32.43 AM
