To The Moon

• When I mentioned Nvidia in my “Magnificent Seven” webinar on 7 Feb, it was trading around USD 682. It has since soared 28%, closing at USD 875.28 on Friday night.

• Nvidia endured a mini selloff on Friday night, correcting 10% to close at USD 875.28 after reaching an all-time high at USD 974.

• The intraday high for Friday trading was USD 974, which failed to reach the 300% Fibonacci Extension at USD 1012. Normally, the sell-off will gain momentum if it hits and bounces off the resistance level. Instead of viewing the Friday’s selldown as profit-taking by bulls, I prefer to see it as a last-ditch effort by bears to push prices down, as bears may capitulate once its share price breaks above USD 1000.

• However, bears may argue that the sell-off may have legs as it successfully formed a bearish engulfing pattern in Friday's daily candlestick and a shooting star reversal pattern in the weekly candlestick.

• Traders may also remember that Nvidia formed a dark cloud cover reversal pattern in the weekly candlestick in Oct 2021, subsequently correcting by another 65%.

• Bears may also bet on the release of hotter-than-expected CPI data on 12 Mar as a potential fundamental reason for the continuation of the sell-off.

• I view the candlestick reversal pattern as one of the early technical weaknesses in Nvidia, but I prefer to wait for more technical confirmations to confirm that Nvidia is heading for a significant correction.

• Fundamentally, I still reckon that the rally has legs, as we have not seen earnings growth decelerate yet.

• The case of doing nothing: we believe that if investors/traders cannot read the short-term direction of stocks well, the correct thing may be just to do nothing.

Investment Strategy:

1. Buy Protective Put:

• If Nvidia investors are concerned about the short-term adverse movement of Nvidia, they may employ a protective put strategy to limit potential losses.

• For instance, buying an at-the-money (ATM) put with a strike price of USD 875 and an expiration date on 12 April.

• It's essential to note that investors might be potentially overprotected if they hold fewer than 100 Nvidia shares since one option contract represents 100 shares.

2. Buy Inverse Nvidia ETFs:

• In the event of Nvidia investors being uneasy about the short-term adverse movement of Nvidia, they could consider using AXS 1.25X NVDA Bear Daily ETF (NVDS) or Direxion Daily NVDA Bear 1X Shares (NVDD) to limit potential losses.

3.Long-Term Buy and Hold Strategy:

• For long-term buy-and-hold investors seeking to accumulate Nvidia shares at lower prices, they may find meaningful support levels at USD 835, USD 792, USD 710, USD 646, and USD 595.

Source: Tiger PC APP