How to Trade Nvidia at All-Time Highs

Nvidia is ripping higher on Friday, hitting all-time highs on better-than-expected earnings. What's next for the stock?
Author:
Publish date:

Nvidia (NVDA) - Get Report shares were racing higher on Friday, up 7.3% on better-than-expected earnings from the chipmaker.

The move sent Nvidia to all-time highs for the first time since October 2018. It finally joins the Nasdaq Stock Market, peers like Advanced Micro Devices (AMD) - Get Report and many other tech leaders in notching new highs.

For patient investors, it’s been a long time coming. But now that we’re here, what’s next?

The company reported fiscal fourth-quarter earnings of $1.89 a share, beating estimates by 22 cents. Revenue of $3.11 billion grew more than 40% year over year to $130 million. In other words, Nvidia’s got momentum again, and guidance confirmed as much.

Even after accounting for a $100 million reduction in first-quarter revenue due to the coronavirus, the midpoint of management’s sales outlook rang in at $3 billion, well ahead of the $2.86 billion consensus. No wonder Nvidia is Real Money’s Stock of the Day.

Let’s take a closer look at the charts.

Nvidia is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells NVDA? Learn more now.

Trading Nvidia Stock

Daily chart of Nvidia stock.

Daily chart of Nvidia stock.

Earlier this week, I pointed out that even though Nvidia hasn’t made an all-time high in a while, its charts still looked quite bullish. That bullish momentum and strong uptrend continue to play out now, as one can see on the daily chart above.

On Monday, Nvidia shares burst higher, climbing 4.5% on the day after some bullish analyst commentary. In the next three days, shares crawled higher, consolidating near its 52-week highs as investors prepped for earnings.

This was a solid setup for bulls, as the short three-day rest following a solid rally did two things. First, it gave the stock cushion in the event of a post-earnings selloff, which would have allowed the stock to pullback without dealing a huge technical blow to the charts. Second, that short rest allowed Nvidia to rally in the event of a positive report.

In our pre-earnings preview piece mentioned earlier, we were looking for a bullish reaction to take Nvidia above $280. Above that put the prior all-time high just over $290 within reach.

The next stop? Investors will have their eyes on $300, a nice round, psychologically important level. If it can continue higher in the weeks and months ahead, $331.43 may be one possible upside target. That’s the 1.236% extension from the 2019 low to the 2018 high. The 1.382% extension is up near $355, for what it's worth. 

Should NVDA shares pull back, see if Friday’s low of day holds at $286. Below that puts the backside of prior uptrend resistance on the table.