NVIDIA May Have Hit Rock Bottom

Stocks across the globe are once again opening the week in the red as tough trade talk over the weekend weighed on investor sentiment. The EU warned of hefty reciprocal U.S. tariffs, the RCEP trade pact resurfaced and there are worries about what Mexico’s new president means for NAFTA.

*Source:  Seeking Alpha

Let’s consider NVIDIA Corp. (ticker: NVDA)

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out two significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average between 6/29/18 and 7/2/18.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN position back on that same day.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. I want to play the VP bullish indication.

Strategy Discussion

If one was strictly a stock trader, buying NVDA in the $238.50 area could be prudent.  You are anticipating a move to the upside.  As a protective measure, it is always good practice to place a sell-stop order.  In this case, placing that order in the $235.00 area will mitigate potential losses.

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking a passive, premium credit approach may be the best path to success.

Because of the reasons given above, the sale of a credit put spread may be one way to approach this situation.  You want to collect the most premium you can for as little time as you can while staying within one’s risk tolerances.  You may want to consider the NVDA July 13th weekly expiration 232.5/235 put spread, selling it for $0.85.  The most you can profit is the credit received and the most you risk is the width of the spread less any premium collected.  Max reward = $0.85 and max risk = $1.65.  This means that you are laying odds of 1.94:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.