U.S. equities trade with modest losses on Monday, as all attention turns toward the political chaos underway in Washington D.C. Namely, ongoing “Russia hacking” claims and President Trump’s accusation that President Obama wiretapped him during the campaign — echoing Watergate and President Nixon’s use of the state intelligence apparatus for political gain.
If all that wasn’t enough, Trump also signed a new executive action banning non-visa entry from six Middle Eastern countries in an effort to fight possible terror threats here at home. A prior version of the order was contested in court.
All this, combined with the assumption the Federal Reserve will hike interest rates again next week, has dampened the enthusiasm on Wall Street. Reversals are underway in stocks that had gone vertical to help push the Dow Jones Industrial Average above the 21,000 level, including Boeing Co (NYSE:BA), 3M Co (NYSE:MMM) and others.
Other recent momentum favorites are feeling the heat as well, such as much-hyped graphics processor maker Nvidia Corporation (NASDAQ:NVDA), which quadrupled from its low in February 2016 into the high set last month, largely on hopes for the company’s exposure to deep learning and autonomous transportation.
Yet, as I explained last week, the company still depends heavily on selling high-priced GPU cards to hardcore gamers. After a very successful GTX 1000 product launch last year, NVDA stock is poised to suffer from its own success, as year-over-year growth rates slow.
In its latest earnings report, it also highlighted a softening in demand from OEMs — a possible canary in the coal mine, so to speak, about end-user demand.
As shown in the chart above, the 20-day moving average of NVDA stock is poised to cross below its 50-day moving average — confirming the establishment of a medium-term downtrend — for the first time in more than a year. Support likely won’t be found until the November/December low is tested near $85.
All of this has been great news for Edge Pro subscribers enjoying an 80%-plus gain in their March $100 NVDA stock puts. The company will next report results on May 11 after the close. Analysts are looking for earnings of 66 cents per share on revenues of $1.9 billion.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
