NVDA blew out earnings!!
Good Morning!! It is 2/22/2024!!
Market since Friday was not able to go higher because semiconductor high-flyer names like SMCI were getting sold off. NVDA holders were also de-risking before the most anticipated earnings. Due this pullback in SMCI and NVDA, the other AI beneficiary names like MSFT were also pulling back. AAPL was already weak. The last 3 days we had the biggest 3 companies by market cap and weighting in S&P were pulling back and hence all the charts were looking like the most awaited pull back is finally here in the indices.
But NVDA beat and guided higher. The guide is even higher than most bullish Wall Street Estimates. So NVDA rallies, and all semis and the entire market with it.
Lets see where NVDA can go on the charts fully knowing that all targets that I can draw are being easily taken out by NVDA and SMCI.
I took a FIB from beginning of the year to the previous ATH at 746.11 and extended with using the recent low at 662.48.
The 50% extension very nicely comes to 798.94. This means 800 basically is the target.
Disclaimer: This is my trading plan on the indices. This is intended to be for educational and informational purposes only. Trading is risky and loss of capital is possible. Do your due diligence. In trading, there are no guarantees. So please be careful risking capital.
QQQ:
I had talked about the expected move in Q’s based on the options market. And I said it felt less if NVDA misses. But the options market is more efficient than what I think. With the pullback before NVDA earnings, we literally touched Q’s downside expected move level at 421.55.
So, in the discord room, while that was happening, I took off my hedge on Q’s. My thinking then was that we have reached the lower bounds of the expected move. I thought that the weak hands are already out in the indices and NVDA. So anything from here may surprise to the upside. Now, that Q’s have tested the downside, it maybe time to test the upside expected move.
My mistake was not taking a call debit spread on my thinking. I just closed my hedge. I went into NVDA earnings without TECS calls. I did not take any earnings trade in NVDA.
Q’s are at 434.24 while writing this post.
My target for a day trade is 436.12. If we can convincingly close over 436.12 then we are looking to test last week’s high at 439.14 and maybe test the upside expected move at 439.59
Today being a Thursday, the easiest and cheapest way to trade this bias is to do a 439-440 pinning butterfly for tomorrow’s expiration.
Something like 436/439/442 call butterfly on Q’s maybe the way I play this move too.
If Q’s really take off and are at 440 tomorrow then SPX is most likely at 5050-5060.
An easy way to position for that is an XSP call butterfly 502/505/508 call butterfly currently shows at .85 debit.
This is a mid-week update.