Nvidia (NVDA - Get Report) -- every trader's favorite stock -- will report second-quarter earnings on Thursday after the bell. Here's what I'll be watching for ... and three great ways to play the stock right now.
First, let's check NVDA out both fundamentally and technically:
Broad industry expectations are for NVDA to announced roughly $1.65 of earnings per share on $3.1 billion of revenue. If that's how the numbers actually roll in, that'll be good enough for 79% year-over-year earnings growth on 39% of revenue gains, but many outlandishly higher "whisper numbers" for the EPS are being thrown around
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On Monday, Nvidia also announced a roll-out of the first chips based on the firm's new Turing architecture. NVDA labeled this offering the "most important innovation in computer graphics in more than a decade." Exciting? For sure. Why announce this ahead of earnings? We'll have to wait for CEO Jensen Huang's commentary later Thursday to find out.TheStreet's Eric Jhonsa covered all of this extremely well earlier in the week. I read Eric on all things tech, as he's simply the best at what he does. If I were to go there, my thoughts would be greatly influenced by his. So give his column a read -- and check back at TheStreet.com at 4 p.m. ET Thursday afternoon as Eric live-blogs about Nvidia's earnings report and conference call.
To me, whatever guidance gives on the following will be key:
1. The Data Center
4. Crypto Demand
5. Rising Margins
What does this chart tell us? For one, Chaikin Money Flow ("(CMF20)" above) has been strong for about a month. The daily Moving Average Convergence Divergence (MCAD) and Relative Strength Index (RSI) both might look rather pedestrian in nature going into tonight's call, but neither signals a problem in the least. More pronounced here is this name's repeated penchant for finding support at a 61.8% retracement off of recent highs on pullbacks.
This indicates, to me, algorithmic control of the point of sale. Figuring out where these guys live is how you beat them, gang. At the moment of truth, it will be you, silent in the weeds, covered in slime just to mask your scent. It will be them who set their algos, and then go back to watching teenagers crack up riding skateboards on YouTube. Let them be hunted. You be the hunter.
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What I also see is the very beginning stages of a new Pitchfork should a breakout occur. Not only does support for this Pitchfork extend into the $270s as soon as early September, it suggests much-higher prices after that. Of course, all you need in the first place is the positive break. Wells Fargo did hand NVDA a double upgrade yesterday afternoon. That bit of positive info brought with it a $315 price target.
My Recommended Trades
Here are three ways I recommend playing Nvidia:
1. Get Long NVDA Shares. I am long this stock. Is is too late to get long some equity? Well, the name has been mildly increasing in price sine late June, despite yesterday's tech selloff. The lower trend line of support has held to the same dramatic launch angle really since late 2015. Obviously there is risk going into an event like this.
2. Short NVDA Puts That Expire Friday. I am also short NVDA $232.50 puts that expire tomorrow. I am short these at much higher prices, as I timed this event nearly two months ago, but last night, given the nature of this beast, they still paid $0.93. The $240 puts with the same expiration paid $1.79. Might be a decent scalp to take.
3. Sell Puts on Nvidia's November Earnings Report. Want to get aggressive in a somewhat risk-controlled way? Nvidia will report again in early November. The $230 November puts went out Wednesday night with a last sale of $7.45, while the $235s were fetching $8.70. Heck, even the November $180s (yes, $180s) will still pay you more than a buck. You want to make a hundred bucks to risk having to buy NVDA at $179, which is roughly $80 below the stock's current price? Hmm.
(This item has been updated.)
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