Trading NVDA Earnings

by | Nov 20, 2024 | The Doctor's Dose

NVIDIA Earnings Trading Strategies

This article dives into NVIDIA Earnings Trading Strategies, offering actionable insights on how to trade NVDA stock post-earnings.

NVIDIA Earnings Trading Strategies: How to Trade NVDA Post-Report

NVIDIA Corporation (NVDA) is set to report its Q3 FY earnings today after the market close. Expectations are high as the company has consistently delivered impressive results, driven by its dominant position in the AI chip market and strong financial performance.

Quick Overview:

  • Unmatched Streak: NVIDIA has consistently beaten earnings and revenue estimates.
  • 2024 Performance: The stock is up +197% YTD and +62% from August lows.
  • Investor Sentiment: Analysts remain bullish on the stock and the AI sector.
  • Estimates: Revenues of $33.07B and EPS of $0.74 are expected for Q3.
  • Guidance Watch: Q4 guidance and Blackwell chip demand will be critical drivers.
  • Valuation Metrics: RSI of 59 and forward P/E of 42 remain below 2024 highs.

Movement Expectations:

The options market is pricing in a potential move of +/-$12 (about 9.6%), indicating significant volatility after earnings.

Analyst Sentiment:

  • Ratings: 59 Buy, 4 Hold, 0 Sell.
  • Average Target Price: $160.38.

What Could Happen After Earnings?

  1. Earnings and Guidance Beat
    • If NVIDIA beats both revenue and EPS and raises Q4 guidance, the stock could see a sharp rally. Positive comments on Blackwell chip demand and AI market strength would fuel optimism.
    • Trading Idea: Look for a breakout above key resistance levels around recent highs. For AI exposure, consider short-term call options or leveraged ETFs like SOXL.
  2. In-Line Earnings and Guidance
    • If NVIDIA meets expectations but does not raise guidance, the reaction may be muted. The market might consolidate as investors look for long-term AI growth drivers.
    • Trading Idea: Focus on selling covered calls to generate income or look for swing trade opportunities if the stock consolidates near support.
  3. Earnings Miss or Weak Guidance
    • A miss on revenue or guidance could lead to a selloff as investors reassess NVIDIA’s valuation in a highly competitive market. Concerns around Blackwell demand or margins could amplify the downside.
    • Trading Idea: Consider buying puts or inverse ETFs like SOXS to hedge against potential losses. Look for buying opportunities near strong support levels if the stock pulls back significantly.

Recent Earnings Reactions:

  • Q2: Stock fell -6.4% despite a 6% EPS and 5% revenue beat.
  • Q1: Stock rallied +16.4% after a 10% EPS and 6% revenue beat.

Historical Performance:

  • NVIDIA has beaten revenue estimates in 20 of the last 20 quarters and earnings estimates in 18 of the last 20 quarters.
  • The stock has risen the day after earnings in 13 of the last 20 quarters, with an average next-day return of +3.3%.

Day Trading Ideas for NVIDIA Earnings

Explore NVIDIA Earnings Trading Strategies to capitalize on potential breakouts, selloffs, or choppy trading post-report.

With NVIDIA’s earnings report set to be a major market mover, here are some day trading ideas to capitalize on potential volatility following the announcement:

  1. Earnings Beat: Go Long on Momentum
  • Scenario: If NVIDIA beats revenue and EPS estimates and issues strong guidance, expect an immediate surge in buying interest.
  • Trading Idea:
    • Look for breakout levels above recent highs. If the stock breaks above this level with volume, ride the upward momentum.
    • Use pre-market high levels as confirmation for entry points. Watch for continuation in the first 30 minutes of trading.
    • Consider scalping call options or trading leveraged ETFs like SOXL for amplified gains on bullish momentum.
  1. Earnings Miss or Weak Guidance: Short the Selloff
  • Scenario: If NVIDIA misses estimates or provides weaker-than-expected guidance, expect a significant selloff as investors reprice the stock.
  • Trading Idea:
    • Look for a breakdown below the 50-day moving average for short entries. If this level fails, a move or lower is possible.
    • Use inverse ETFs like SOXS to profit from the downside with reduced individual stock risk.
    • Consider buying put options for a leveraged short position, focusing on weekly expirations for quick profit.
  1. In-Line Earnings: Play the Volatility
  • Scenario: If NVIDIA reports results that are in line with expectations, the stock could enter a period of choppy trading.
  • Trading Idea:
    • Use VWAP (Volume Weighted Average Price) as a key intraday indicator. Trade within a range until a clear trend emerges.
    • Focus on scalping quick moves during periods of high volume and liquidity.
    • Set tight stop-losses to manage risk, as range-bound trading can lead to fake breakouts or breakdowns.
  1. Pre-Earnings or Immediate Post-Earnings Play:
  • Before the Announcement:
    • Trade the options market using a straddle strategy (buy both calls and puts) to profit from the large implied move, regardless of direction. This works if the move exceeds the expected $12 range.
    • For pre-market trades, focus on volume spikes in reaction to earnings and guidance.
  • Right After the Announcement (Pre-Market Open):
    • Watch for initial volatility in extended-hours trading. If NVIDIA gaps up or down, look for reversal opportunities at key support/resistance levels.
  1. Trade-Related Stocks for Sympathy Moves
  • Scenario: NVIDIA earnings will likely affect other semiconductor and AI-related stocks.
  • Trading Idea:
    • Look at AMD, TSMC, and Intel for sympathy moves in response to NVIDIA’s report.
    • Trade ETFs like SMH (VanEck Semiconductor ETF) for broader exposure to the sector.
    • Watch for correlated movements in major indices like the Nasdaq 100 (QQQ) if NVIDIA drives significant momentum.

Key Day Trading Tips:

  • Use Tight Stops: NVIDIA’s post-earnings moves can be highly volatile. Protect your downside with tight stop-loss orders.
  • Follow Volume and Price Action: Track pre-market and intraday volume to confirm trends.
  • Be Patient with Entries: Wait for clear breakouts, breakdowns, or retracements to avoid getting caught in fake moves.
  • Watch Market Sentiment: For additional context, monitor how broader markets (S&P 500, Nasdaq) are reacting to NVIDIA’s report.

By following these NVIDIA Earnings Trading Strategies, traders can seize opportunities while managing risk effectively in the fast-moving market. Combining these day trading strategies with a disciplined approach allows you to capitalize on NVIDIA’s earnings volatility while managing risk effectively. The profit opportunities are abundant if you’re trading the stock, options, or related ETFs!

Good Trading,

Adrian Manz

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