When Nvidia earnings came out we thought we could all breathe a sigh of relief. Not many of us could predict the rollercoaster ride that was about to occur. I discussed the importance of their results and key levels to watch with Brian Sullivan on “Power Lunch” earlier in the week . Now that we’ve seen things play out, let’s focus on how to trade the stock. Coming into earnings, the stock had done something it hadn’t done in the last two years – sold off into the numbers. Previously, shares had traded at or near highs when they reported and had rallied into its announcement. NVDA 3M mountain Nvidia, 3 months In Thursday’s case, we had a recent peak-to-trough pullback of nearly 12% with a small rally back to its 50-day moving average. Technically, there were reasons to be optimistic and fundamentally the news was great and so was the guide. Things were looking rosy out of the starting gate. Watch the Gap… Traders were watching Thursday’s opening gap closely. Shares opened at $195.95 and peaked at $196. Then it reversed. NVDA 5D mountain Nvidia, 5 days We have seen Nvidia shares gap higher on good earnings before. Back in late August, shares gapped higher by 6.6%, traded a nickel higher and then gave back all its gains. Clearly it was how we closed on earnings day that mattered. On Thursday, that opening gap filled and we traded lower, creating a bearish engulfing candle that doesn’t bode well for the next few days. The hope was that Thursday’s opening gap not only held, but began a leg back to its highs around $210. That plan is on hold as we reassess the price action from Thursday. Momentum Looking at its RSI, we didn’t get a positive push back above the midline which would have been a bullish turn. Now we gauge the lower oversold levels at 30. Historically, anything under 35 for NVDA has been a buyable trade. It’s only been oversold one time in the last three years. The next phase Look for the shares to consolidate. In the three-year chart above you can see that there have been consolidation phases after a great earnings period — see August 2023. Expect shares to trend sideways around its 50-day moving average going forward as it builds up momentum to go higher again. The upside resistance is Thursday’s high at $196 and downside support is around $175. Given its history of great results followed by sideways price action expect it to take time before resuming its trend higher. The downside risk The former trader in me is always thinking about the worst-case scenario and what if something changes. Shareholders of NVDA have experienced this volatile price action in the past. Thursday was a very frustrating day, but the long-term trader and investor should just sit back and relax. If price breaks below support, then a deeper sell-off to its 200-day moving average at $153 is possible and will be more indicative of a sharper market sell-off. I don’t see that playing out as we have strong earnings and guidance as a tailwind. History has shown it will be a great buying opportunity if it does crack. For those of us like myself expecting Nvidia to play Atlas and hold up this market, we realized that Atlas shrugged. Bitcoin’s collapse and Fed uncertainty was too much for Nvidia to handle on this day. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
