The broader market may have deservedly shifted into reverse Wednesday, but Nvidia Corporation (NVDA) continues to drive forward on and off the chart. And it’s not too late to hop on board Nvidia for a ride higher with an intermediate-term, long call position.
For investors looking for a well-positioned company, it doesn’t get much better than NVDA in today’s market. Fundamentally, the company is firing on all cylinders.
A combination of strong earnings results and solid growth prospects tied to the Nvidia’s dominant positioning in gaming and strong inroads into other rapidly increasing markets such as driverless autos, cloud computing and virtual reality — all support the idea Nvidia of revving fundamentally.
And technically speaking, Nvidia stock also looks driven to move north on its price chart. Let me explain.
NVDA Stock Daily Chart
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At the time, we presented the case for buying Nvidia shares on weakness as it tested a key weekly chart support zone.
Nvidia went on to rally a quick 7%, and our long call thesis was spot-on before NVDA was dragged lower with the broader market, which flailed technically into the first half of February.
Having said that, our outlined support area from $24.75 to $27 literally nailed Nvidia’s low to the penny, allowing shares of Nvidia to retain its bullish leadership in our view.
Ultimately, finding support within a calculated price band is something we like to see as it suggests that even in the worst of times, NVDA had institutional backing and interested buyers.
Fast forward to today’s market and Nvidia has continued to impress technically.
The rally in Nvidia off its lows has formed a bullish cup-and-handle pattern and is now staging a technical breakout with volume confirmation. And that’s just the sort of price action growth traders like to position from.
Nvidia Stock Long Call Strategy
Given Nvidia’s undeniable strength and technical positioning, as well as favorably cheap option premiums, an outright long call position might be considered appropriate.
In reviewing the board, the Nvidia June $37 call priced for $1.21 mid-market with NVDA stock at $34.43 stands out as an attractive position.
Favoring this out-of-the-money call is the softer starting directional risk (and reward) of 35 deltas compared to an outright position in Nvidia stock.
Coupled with cheap premiums, should the broader market once again take Nvidia stock down with it, this particular Nvidia call trader has more modest risk exposure on a per contract basis. That’s something to consider.
On the upside and regarding potential reward prospects, June is also far enough away on the calendar that time decay doesn’t currently pose an issue for this Nvidia call. That’s a definite plus as well.
Additionally, for a growth stock such as Nvidia, a 15% minimum move from the breakout point, is typically expected by traders. That kind of price strength bodes well for the Nvidia June call.
Bottom line, if history is any guide, it suggests there’s a strong opportunity for this Nvidia contract to go in-the-money– and plenty of time to improve its value for bullish investors in the interim.
Investment accounts under Christopher Tyler’s management currently own positions in Nvidia stock and its derivatives. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
