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Nvidia Report Was Robust - Here's How to Trade the Stock

Nvidia reported better-than-expected earnings and above-consensus guidance, yet the stock isn't rallying. Here's how to trade it now.

Another quarter, another blowout quarterly result from Nvidia  (NVDA) - Get NVIDIA Corporation Report - although you wouldn't know it with the shares about flat on the day.

At a time when businesses are struggling due to the coronavirus, a handful of names are doing well. Chipmakers Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report and Nvidia are two of the names doing well in this environment.

Nvidia's earnings of $2.18 a share beat expectations of $1.98, while revenue grew 50% year-over-year to $3.87 billion. That figure easily topped expectations for $3.65 billion.

Even better was the guidance.

Management expects revenue of about $4.4 billion, well ahead of consensus estimates at $3.97 billion.

So why isn’t the stock up? Better-than-expected results and strong guidance are usually a recipe for a move higher. But with the strong rally ahead of the print, the stock is having a difficult time rallying.

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Trading Nvidia Stock

Daily chart of Nvidia stock.

Daily chart of Nvidia stock.

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From the March low to the close ahead of Nvidia’s May earnings report, the shares rallied 94%. From there, the stock endured a minor dip before again going on a heady rally.

In fact, the shares rallied another 51% from the post-earnings low in May to the most recent report. Altogether, Nvidia shares were up almost 170% from the March low into Wednesday evening's quarterly results. 

To say that expectations were high may be an understatement, and the muted Thursday response to the strong results may reiterate that point.

That’s not to say, however, it’s time to take off our bull hats and put on the bear suits. 

After all, the stock is not down 10% on worse-than-expected results. So we can’t and we shouldn’t get overly bearish until there is a reason to do so.

From here: If Nvidia holds this week’s low at $472.69 and the 10-day moving average, it keeps $500-plus in play. 

Over $500 and the 261.8% extension at $535 will be on traders’ radar.

A close below this week’s low puts the two-times range extension in play near $450 and the 20-day moving average. 

If buyers fail to elevate Nvidia from there, it puts the $432 level in play, followed by the 50-day moving average.