Yes, I heard about the crazy guidance. Reminds me of the dot-com boom in 2000. Of course maybe they are all right this time. They appear to have been right yesterday. But I’m still suspicious of all the after hours selling (and couple days ago the last time they jumped to all time highs). We shall see.
I notice that S&P is not exactly getting a similar jump.
NVDA opened slightly (pennnies) below where they closed in after hours yesterday and have so far been selling off early this morning. The gap has a bottom of 481.87 meaning that there are no trades from up here to that level which also means there is no meaningful support. If they happen to fall to this level today, then the gap is completely filled which will be a very bad sign on day 1.
Gap filled…QQQ negative…not a great day
The FOMC is weighing heavily on the indexes with tech especially hard hit.
I was studying $SPY looking for an entry point but the call put options premiums are really high right now. S&P seems to be in the midpoint of its 2 week trading range with what I calculate the upper end around 4528 and the lower end around 4333 with the S&P right now at 4417 but too pricey for me…doc
I think the S&P option premiums are up because of the Fed Jackson Hole meeting this week. I would only trade options if I intend to be out same day or next day. If you hold any options over the weekend, they will lose significant value on Monday. On the other hand they may gain a little more value on IV between today and tomorrow.
For instance, I bought a SPY put today in the late morning in the middle of the downdraft when it looked like a consolidation. I got out around 1:30 on the double bottom with RSI divergence. On a relatively small 1% down move on SPY I booked a 25% profit. Given that this was a same day trade, the fact that option premiums might be expensive had no meaning for me.
25% profit during the same day is nothing to ignore. As GOOGL has drifted down, my puts that I still hold from the strangle have taken me over into a small profit on that trade. I’m waiting until at least tomorrow to sell after the FOMC talk…
I am surprised that NVDA came that far back down. I would have expected it to react much like it did after their last earnings call. Is the market not experiencing a setback from uncertainty about Saudi Arabia having joined BRICS yesterday? This seems like a big macro deal to me. Yet, I’m not seeing it mentioned many places.
Well…
NVDA closed basically unchanged from yesterday. Does that count? 
As predicted, the market as a whole had a horrible day and NVDA doesn’t look so great.
I think also that the August downtrend is now looking more and more like the start of a more significant correction.
NVDA (and the rest of the market) went down because people were “selling the news.” This often happens when things go up for a long time. People look for an excuse to sell and bank profits, and they will often do it on good news. The market may have been down a bit in August, but all year long we have been in an uptrend. People have been saying all week that the entire market (not just techs) was watching NVDA to see where we are going. NVDA spiked up to around 520 yesterday after hours, but almost immediately began selling off. They opened today just over 500, and the selloff continued. They leveled off in the middle of the day then sold down to about unchanged from yesterday. It’s as though their earnings had zero effect on their stock price.
When NVDA began to sell the up gap (S&P 500 also gapped up), the whole market began to sell on strength. S&P now looks horrible, as well as all the charts for the biggest members of the S&P.
Just read a newsletter that basically says the same thing. Lots of profit taking across the whole market spurred by NVDAs good news. Thanks for sharing your experience with the straddle. It’s interesting to learn about even though I don’t see myself being ready for that anytime soon.
We shall see how it ends up, but currently this NVDA straddle encountered the worst case scenario. They had a momentary pop upward, but not very high compared to what everyone expected and not enough for me to profit on my calls. Then it proceeded to sell off right away and all day eating up any profits on the call side, then ended the day basically unchanged from yesterday. Unchanged is the absolute worst case on any straddle. Plus, the options premiums disappeared so that no matter what you did you are looking at a loss if you close today.
In my case, my puts have a lot of life left (they don’t expire until December) so I can actually sit and wait for an extended downtrend. This was by design. I told myself that if the worst case happens and NVDA trades sideways this will be seen by everyone as a very bad sign (because everyone expected a blowout win) and the stock will trend downward. Now I need for this to happen in order to profit, but it’s going to take some time.
I cant argue with that…But Derek, here is a query:
I feel this whole thing, is in a way, rigged! From my very basic understanding, I am assuming NVDA gave out a great earnings report…The expectations were already sky high, and they delivered above that!!
I am assuming there were lots, LOTS of money betting on both sides before ER.
The immediate reaction, after the super ER report - Price rockets as shorts are covering…and the prices kept going up, probably with every excited folks jumping in…But at some stage, the bigger forces (hedge funds) come at play here…It is probably in their best interests to talk it down, and push the price down as much as possible…and then load in.
For example: NVDA gave a similar great Earnings report last time - stock price sky rocketed from 300 or so, all the way to 400 and something…and fell the next day to 360! and then after sometime starts rallying…then sideways up and down trading, with very wild volatile swings, no doubt exaggerated by options activity.
So, I am assuming that the bigger forces are still at play here…the market fell because of several reasons…The bigger forces needed some reason…jobs report was slightly off the expectation…and that was enough for them to push the one stock they wanted to push down…The small retail traders would cave in…dominoes effect…and once the price falls to sufficiently low level, the bigger forces on the opposite end jump in and the prices start going up.
So, all we are seeing is extraordinary price volatility…which clearly drives me crazy ):
But going back…On a fundamental Analysis…was the earnings report below average, average, above average?
Lets take the highest price 520…Do we think this price will be reached again BEFORE the next earnings report…
My guess is…Yes, But this happens only if the inflation data goes in the right direction and we don’t get any black swan events…The reason quoted by some is that the FED said today there will not be any rate cuts anytime time soon…but, they have said this multiple, multiple times already…So, how did this message repeated today become such a big unexpected negative catalyst?
Regardless, there is so much to be thankful to NVDA…If NVDA had reported even slightly off numbers, I am sure we would have seen absolute blood bath today…Thank you God and…Jensen!
Will NVDA crater at some point…Yes, but that might be in 2024 or 2025…and if AI fades…but as of now, all the companies want the GPU chips and the demand is just unbelievably high…and NVDA is the ONLY player there is.
Again, please feel to criticize this as I am a total novice and trying to see where I can be wrong.
For example - I had invested in Fiverr in Feb 2021 because Motley fool said so…and clearly missed the memo from the market that the pandemic darlings were to be bid good bye…and so I kept buying as everyone and their grandmother kept selling…and there were many stocks like that…Like I said, I had no idea what I was doing…
I dont think I know much now at all…but at least I am trying to learn.
With NVDA, arent we on a totally different track…the AI hype/ journey/ theme is just getting started…And it is either real or it isnt…but as long as the companies keep wanting AI chips, NVDA will have a huge revenue/earnings upside…and from all evidence, there seems to be nothing to suggest that the demand for this is reducing anytime this year.
So,
Inspired,
The earnings report was out of this world. So much greater than any company in history. But on this board I am only interested in trading. You do not trade based on your knowledge of financial fundamentals. Anyone who does this ends up failing. When you are trading you are only concerned with what the stock price has been doing, is doing right now, and what you think it will do. I could care less what the company even does or if it does it well or if it makes any profits. That is all irrelevant.
The NVDA price spiked after-hours to 520 and probably could have spiked even higher, then immediately people sold into the rise on high volume to take profits and closed after hours a little more than 500. When it opened today, the selling continued in the morning. The price settled down for a while, then sold off at the end of the day down to unchanged (it went negative after hours today), which essentially tells us that their unbelievably great report amounts to basically nothing. This report was history making. Not only did they blow away estimates by billions, but they raised future guidance by billions. No other company has ever done that. In order to do that you need to be a huge company. There are only a handful of companies that were ever over a trillion dollars in market cap and NVDA is one of them. 10 years ago there was never a trillion dollar company. Nobody else could even think about doing what NVDA did.
But so what? As a stock trader I could care less about any of this. They were not supposed to sell off, and the selloff happened across the market. This was not supposed to happen, but it did. And those who were prepared were able to make money.
Anyway, I guess my main point to you after reading what you wrote is that you need to decide what you are. Are you an investor or are you a trader? Personally, I am both, but I keep the two totally separate. What I buy for long-term buy and hold (LTBH) has nothing to do with what I’m doing in trading and vice versa. I really don’t ever allow them to mix. Sure, I could trade NVDA up and down, but then still own them for long term investments, but I do not. Most growth stocks, particularly high tech, are good for trading so I purposely never buy them for investments. My LTBH is primarily composed of relatively boring stocks that pay well in dividends. Income paying stocks (dividends) are typically not very volatile which is what you really want for trading.
Derek,
Can I ask you what you would have done immediately after the ER…
Say you wanted to trade it…the ER was great…and the stock spiked…do you follow strict guidelines as a trader in these situations…
What would have been your entry point? ( For example, would you say never buy after hours?? And if you would have traded only today, when would you have bought it?)
And would you have set a specific exit point?
Thanks,
Charlie
Regarding NVDA, I was in a unique situation. I’ve posted about this here and on the Options board. But I was in an existing strangle on NVDA. A strangle is where you buy put and call options at different strike prices betting that the stock price will move significantly either up or down. In a classic strangle, you don’t care if it goes up or goes down because you make money either way. How you lose is if the stock price stays in a narrow range neither up or down. If the price moves a lot then you can make enough money on one side (calls or the puts) to pay for both sides plus a nice profit. That’s how it’s supposed to work.
Now, my situation was more unique than that. I started out with just puts. I did this because everybody and their brother was saying how wonderful NVDA was and how they expect them to blow away estimates. Often, when everyone is buying and singing their praises that’s when the house comes crashing down. That’s what happened to all those tech stocks in 2000 when the dot-com bubble burst. But then at the last minute I got nervous and added some calls which turned my trade into a strangle of sorts. But it was still oriented towards the puts. In my “strangle”, if NVDA went up by 15% then I would get a small profit, but if they went down by 15% I would triple my money. Last quarter when NVDA blew away estimates they went up by 24%. I was expecting a big move.
After-hours yesterday, they topped out at 520 (+10.4%), but today their high was like 500 (+6.1%). Neither was high enough for me to make a profit on the upside. Then they traded down all day and closed unchanged (slightly negative after-hours). Unchanged is the absolute worst case in a strangle. If I had to close everything today I would lose money on everything.
But one thing I decided was that if the absolute worst case happens and the stock price is unchanged, then given all the hype that’s been going on for weeks on this stock, this will be viewed by everyone as a negative and the stock price would get weak and trend downward. So I made sure to give me plenty of time on the put side. My calls expire soon, but my puts don’t expire until December. So I have a little time to let NVDA drift down to where I can make a profit. Even if it experiences volatility both up and down (which may be likely), such volatility also is a bearish sign. I’ll just play this as it goes.
The strangle aside, I also traded a put on NVDA today. It was trading down pretty hard, so I bought a put. Sure enough it kept going down, bounced, went back down and bounced again a little lower leaving a positive RSI divergence, so I got out with a 25% gain and this from a 1.0% - 1.5% down move in the stock (not sure about the exact stock prices when I entered and exited). It turns out that had I held to the end of the day I would have done much better, but I didn’t want to risk having a bigger bounce up. This trade was not something I planned for ahead of time. It just felt negative to me at the time so I entered and exited according to plan.
So I have this intraday trade on NVDA, plus I have my puts which expire in December. All my trade calculations showing possible profit on the puts are based on options prices earlier this week which are all wrong because post earnings, the prices have all come down. I’ll likely take a look at that tomorrow.
Charlie,
Sorry, I didn’t answer all your questions, but they may not all apply to me.
Right after the earnings, I just watched the action in after hours. Right away, I saw that traders where selling into the updraft. After hours had a high of 520 and ended around 505. The volume was uncharacteristically high, probably because this stock was so talked up that everyone and their brother was playing it after hours. But the high volume gave the action validity. Often the action in after hours can be very volitile, but this is because of the low volume which allows a smaller number of people to have a larger impact on prices. You almost can’t trust after-hours action because of this. I felt that the after-hours action on NVDA was very bad which made me wonder what it would do the next day. The action today started out lower than the 520 in after-hours, but selling immediately started again and the action reminded me of after hours.
Now one thing you need to understand is that I generally do not buy or short stocks. Instead, I buy calls and puts (options). I do this because the return that you can get is many times higher with options due to increased leverage. You pay a smaller amount but control 100 shares per options contract. Which is why on my put trade today, NVDA went down between 1.0% and 1.5% (I don’t know the exact stock prices because I’m watching the options prices), but my profit was 25%. So my profit was 16X-25X. The nice thing is that with options your possible gain is infinite, but your possible loss is 100%. I’ve exceeded 100% on an options trade many times (more times than I can count).
Regarding after hours (and pre-market) I generally do not trade at these times because I don’t trade actual stocks. My broker only does options during regular hours, but even if they did extended hours, I don’t think I would want to play with options when the volume is so low making the bid-ask spreads very wide. It’s bad enough during the day on a lot of stocks that are not very popular.
Regarding exits, I generally do not set a specific target number where I will exit. I do keep an eye on support and resistance levels so that I know where to look for a potential bounce, but generally, I track the patterns and get out when it looks like it could go against me. My favorite these days is to look for RSI divergence (both entries and exits) which I have talked about in other threads on the Fool.
Oh wait, it was this thread. Scroll up to Aug 17.
Okay, more thoughts on SPY and the market in general. All the talking heads are saying that the little downturn we had in the first half of August turns out was not too bad. It was only around 5% and now since August 18 we are up and with strength. Everyone expects for us to resume our 2023 uptrend.
Me, I’m still bearish. When all the experts on CNBC are saying that we are back into a bull market that makes me even more skeptical. Now, I am still holding puts which are currently losers and if I am wrong and all the experts are right then they will all be big losers. I accept this as a possibility. Being a successful trader does not mean never losing. The puts that I am holding are cheaper out of the money variety, and I never have many contracts. Often only one, but sometimes a few, I never buy positions valued in the thousands.
Now, looking at the recent chart on SPY, it still doesn’t look great to me.
Now this chart is an hourly line chart rather than candles because the RSI Oscillator below the chart is based only on closing prices and the candle lengths make it harder to see the actual tops and bottoms. The recent activity since the Aug 18 start of uptrend shows three succeeding and increasing upswings (labeled 1, 2, and 3) and one major downswing (labeled A). In general, the volatility, even though they are mostly big upswings, are a bearish indicator to me. Yes, strong up moves are bearish to me.
Also, you can see that there are negative RSI divergences. The first one marked goes from July 12 to July 31. And the second one is going on right now starting Aug 29. A negative divergence indicates that a downside reversal of an uptrend is more likely. Now, keep in mind these divergences do NOT work all the time. If they did, I would be a billionaire. They just indicate that all things being equal (which they rarely are) a reversal is more likely, but not guaranteed. For instance, there was a clear negative divergence for SPY on 7/14, but SPY kept going up, and it kept repeating the negative divergence over and over until August when SPY finally started going significantly down.
So what do I think is about to happen? There is now an increased chance that SPY will move more significantly downward. Looking at the recent price patterns, I think it might go down relatively sharply towards point B on my chart. If that happens, then I think it is more likely that it will continue the August downtrend into September which is typically a weak month. Of course, then again, it might not go down at all and it might just keep climbing upward like it did the 2nd half of July and hit a new all time high so that all the talking heads can cheer and tell all their viewers how right they always are.
We shall see…
I should explain this. I think I’ve said this in other places, but in my mind wild swings up and down, even if they result in up overall is volatility which is generally bearish. If a stock is moving up, I would rather see it taking smaller up and down steps generally moving up over time. This is something that can be kept up for a very long time. In the markets, they call this “climbing the wall of worry” which is generally bullish movement. On SPY I would like it better when the daily chart shows a consistent pattern with candles $1-$3 in length. If the candles are more like $5 with some $10 thrown in, then this is too volatile and I have less confidence in an uptrend. You’ll notice on a long term chart of SPY, long daily candles are most common during bear markets or at major tops and bottoms.
Well, it actually got down to 443 on Sept 7 which is close enough to my prediction. The following chart is an hourly showing all the marks I made on the previous chart as well as a placement for my prediction (B). But now the pattern since 9/1 has me a bit puzzled. You all know how I feel about volatility being bearish, even if you are moving upward. But the SPY chart since 9/1 has a lot of air in it.
I guess I feel like gaps are a form of extreme volatility. If you look at a daily chart of SPY or any big company that’s been around for a long time (smaller new high tech stocks don’t count because they are always volatile) and scroll back for years looking for different situations, you’ll find that volatility is generally higher during bear markets when prices are trending down and also during periods that could be considered major tops and bottoms. When prices break out of a consolidation bottom, they generally move up in a more organized trend with shorter candles and more gentle ups and downs and can move up this way for a long time. Then as they approach the top, the action gets more volatile then usually stays volatile as they roll over and trend downward to the next major bottom.
Anyway, 9/14 looked like a nice upspring from consolidation, going back to the early September range before the post-Labor Day dive. We may even set a new September high or even a new 52-week high which is only 1.8% away. But I might look at this as a high and look to play it going down because I just don’t feel too good about this chart.
