I pulled up an inverted chart of NVDA because it provides me with a perspective that forces me to set my bullish or bearish bias aside and look at the chart for what it truly is. I think the chart speaks for its self because downside targets are completely justifiable, assuming it revisits its golden zone price range and we can clearly see a double bottom trend reversal pattern forming perfectly as the price sky rockets to out-of-control levels. Coincidently NVDA reports earnings next Wednesday the 24th of May. In my experience, price action like this, before earnings, often results in a major sell off. Just one more reason to maintain confidence in your short positions in spite of days like today, where NVDA spiked up over $15 or 10% in a single day. This is massive considering its market cap is nearly half a trillion dollars, trillion with a fucking T.
Market capitalization and revenue are two metrics used for value estimation. Market capitalization reflects the total value of a company based on its stock price. Revenue is the amount of money a company earns as a result of sales. Apple is trading at approximately 7x its revenue and historically it has been about 5x and lower. NVDA on the other hand is trading 30x its revenue and has historically traded at about an average of 10x its revenue. So while Apple has increased its earnings to market cap ratio, it is within a modest 50% more than its average. NVDA is trading at an astronomical increase of triple its average. For the permanent bulls out there I challenge you to find any reason at all to justify an increase that substantial.
Good luck out there!
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Let me know what you think. Do you ever use Inverted Charts when analysing stocks?
A different approach, I am a Bull at heart so I trade SQQQ instead of shorting the QQQ. Inverted charts may be what I should start looking at as to not skew my thinking and to see the price action for what it is. Thank you for your ideas! Cheers!
stockrider
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I agree. When stock moves so aggressively before ER, it will go south post earnings even if there is a minor disappointment in the ER. I am also sitting on NVDA $300 puts June expiry. May roll it over to Dec 2023 puts.
vanigar
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Technically, NVDA needs a pullback/correction/cool down/sell off - any term that works for the market. But in bigger picture, fundamentals have shifted for Nvidia as a company. It's the king of AI chips every other company is looking for right now. Meta, Google, Microsoft, Apple, Tesla, ServiceNow are all heavily investing in GenAI and buying NVidia chips for their projects. This gives Nvidia very high pricing power. That's the reason behind this stock rally.
I'm bearish on Nvidia, but I don't think this will ever get to two digit price level unless they do a stock split :). Although, I'd love it if it could fall hard to 80s! What are your thoughts on this fundamentals shift?
Goontata84
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@vanigar, Agree but their last earnings report suggested a growing over supply. so this earning will give us confirmation whether sales have slowed and their supply growing or not. it will tell us exactly what we need to know about how this will play out in the coming weeks/months. I am confident that the news will be more negative than people are expecting, triggering a sell off but once that happens, whatever the severity, it will present the buying opportunity of a life time and I will be loading up.
Turallino
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@Goontata84, I got burned on NVDA multiple times :(
I wanna play this but was thinking to buy puts day or two b4 earnings if the stock runs to earnings. it is unpredictable to play this stock as vanigar mentioned with a lot of hype around AI.
Goontata84
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@Turallino, buy your puts Jan 2024 and beyond. Then you don't have to worry about whatever nonsense goes on between now and the inevitable crash because it will happen. Also contracts get more expensive right before earning because implied volatility goes way up. Best approach is to dollar cost average into position s way out in the future imo.
Turallino
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@Goontata84, cheers, will buy some puts 320 Jan-2024.
washguy
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@Goontata84, Short of century has come and gone.....lol.....buy shares get wealthy.....buy options make the markt maker wealthy.....carry on