This Is Why Nvidia Stock Is a Buy Today

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From one of the market’s top dogs to downright dogged behavior and being completely out-of-favor on Wall Street, it’s time for contrarian investors to consider Nvidia (NASDAQ:NVDA). But if you’re going to buy NVDA stock, it’s okay to look optimistically ahead. Just be sure to price in that bottom-line on the price chart as well.

Let me explain.

For a short while, actually most of 2016 and 2017, NVDA stock was a superstar among growth investors. Shares rocketed higher from near obscurity as demand for its chips within hot emerging markets like data center, cryptocurrency mining, gaming and for artificial intelligence applications across multiple fields appeared to offer limitless and brisk growth for Nvidia.

And Wall Street’s siren song paid off big time for NVDA investors.

NVDA stock was the S&P 500’s top dog in 2016 as shares rocketed higher by 227%. And in 2017, the Nvidia still enjoyed halcyon-like gains of 83% worthy of earning the chip maker another spot in the top 10. But it turns out Nvidia’s aggressive growth assumptions which were offered by Wall Street and gulped down like Kool-Aid by insatiable investors, were toxically optimistic.

After a solid first half performance in 2018 and one on track to make it another banner year for Nvidia stock bulls, trade wars, a bust in the cryptocurrency market, weaker demand from key markets and just this past week, “deteriorating economic conditions in China” prompted Nvidia to cut its outlook. All of this has quickly toppled Nvidia’s bullish narrative in a painfully quick correction.

The good news is the market’s bearish assault on NVDA stock has knocked shares down, but not out. In fact, shares of Nvidia have moved nicely into an area of technical value for contrarian investors willing to look past today’s warnings and on the price chart instead.

NVDA Stock Monthly Chart

I’ll confess, back in early October, I was part of Wall Street’s bullish choir caught singing the praises for Nvidia stock to continue higher. A breakout from a rising wedge pattern had my backing as a reason to not yet question NVDA’s bull-run. I was also clearly wrong, though a proffered December-based options position did prove an excellent insurance policy for the catastrophe ahead.

Today, after following a swift corrective collapse in excess of 55%, it’s time once more to see the upside in owning Nvidia. But now with shares in value territory based on an oversold stochastics setup coinciding with a zone test of a couple key Fibonacci levels and the lower Bollinger Band for support, NVDA stock is on the purchasing radar.

For bullish contrarians agreeable with what’s been discussed, my recommendation is to begin accumulating NVDA shares today. The company’s recent warning sets the stock up for a potential bullish earnings reaction when Nvidia reports in less than two weeks.

My educated guess is the next report will be sufficient to topple this month’s bear raid courtesy of Nvidia’s management and confirm an intermediate bottom in shares already taking shape. Still, in the event we’re wrong (again), sizing an NVDA stock position for stop-loss risk beneath the recent low or using a protective put to define and limit one’s downside exposure makes very good sense.

Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities mentioned in this article. 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 and StockTwits.

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 and StockTwits.


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