It’s less visible compared to other 800-pound gorillas on Wall Street. But don’t make the mistake of overlooking Nvidia (NASDAQ:NVDA). It’s everywhere. And in today’s improved market, NVDA stock is revealing qualities off and on the price chart worth buying.
Some of the market’s most dearly held and richest tech companies were under modest pressure Tuesday. Following a sneak peek at a long-awaited and soon-to-be released anti-trust report against Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB) fears of government-administered break ups were stirred.
And not surprising, the losses were sufficient to apply the brakes on the broader market’s bid over the past several sessions. Plus, negative news about the potential of another stimulus bill from the federal government didn’t help. But semiconductor outfit Nvidia, a giant in its own right, managed to buck the session’s more cautious tone.
In Tuesday’s first half, shares of Nvidia traded up more than 3%. The gains put the stock at its best levels since early September’s all-time high captured immediately in front of the market’s broad-based correction. So, what gives? Behind the defiantly bullish price action, company-specific news has many Nvidia investors seeing the potential for another path to continued outsized growth.
Already a behind-the-scenes powerhouse in growth markets from gaming to data centers and autonomous driving, Nvidia now stands to help in the development of drugs. U.K.-based pharma giant GlaxoSmithKline (NYSE:GSK) is using the company’s artificial intelligence to search for new medicines by poring through vast databases of pathology images and genomic signals.
Bottom line, given it’s Nvidia, it’s not hard to imagine another revenue and profit engine could be on the horizon — one which should persist long after the coronavirus is put to rest.
NVDA Stock Weekly Chart
Source: Charts by TradingView
Even the best stocks correct. And Nvidia isn’t immune to that fact. In fact, during September, NVDA stock peeled nearly 21% off its valuation at its weakest. It happened over just three sessions too. But that’s par for the course in stocks of Nvidia’s caliber when aggressive investor optimism is questioned.
The good news today is that last month’s bearish market inquisition has given way to an improved investing environment. And Nvidia has been influential in leading the charge. What’s more, shares are putting together a nice stimulus package of their own worth buying.
Technically (and aside from Nvidia’s healthy correction), shares are now firmly in the right side of what we can label as a constructive weekly base. All that’s needed to buy the stock, according to one popular investing philosophy, is a pattern breakout. Should that day arise — and I’m confident it can — buying Nvidia stock with a stop-loss of 8% to 10% could capitalize on Nvidia’s bullish bigger picture.
Alternatively, if investors see the many reasons to own Nvidia in the face of Wall Street’s panic attacks and are looking beyond sacrosanct pattern entries, buying shares today as part of a stock collar position is actionable advice with unique benefits. One spread of this type which currently looks well-qualified is the Nov $510 put / $595 call combination for around even money.
On the date of publication, Chris Tyler did not hold, directly or indirectly, positions in any of the securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.