Nvidia recently preannounced disappointing news. Is that all of it or will another shoe drop?
Nvidia (NVDA) – Get NVIDIA Corporation Report on Wednesday is set to report earnings after the market close, and technology investors should be watching closely.
The graphics-chip stalwart’s report comes alongside that of Salesforce (CRM) – Get Salesforce Inc. Report, which also reports after the close (there’s a game plan for that stock, too).
FAANG reported its quarterly results last month and most of the semiconductor giants have reported. It’s been a mixed quarter overall, which combined with the bear market in technology stocks has made investing more difficult.
For what it’s worth, Advanced Micro Devices (AMD) – Get Advanced Micro Devices Inc. Report earlier this month reported a pretty good quarter. It beat earnings and revenue expectations, but guidance was light.
Guidance is a risk for Nvidia, too.
The company on Aug. 8 preannounced some concerning results. Nvidia said revenue would come in around $6.7 billion, short of analysts’ expectations at the time, which called for $8.1 billion.
Gaming revenue and guidance will be the focus. A significant shortfall here could trigger more selling pressure, while better-than-feared results could give some relief to the stock price.
What does that look like on the chart? Let’s examine.
Trading Nvidia Stock on Earnings
Daily chart of Nvidia stock.
Chart courtesy of TrendSpider.com
Since a new volume-based VWAP measure was established on May 26, this level has been both support and resistance for Nvidia stock.
Most recently, it’s been support, as has the 50-day moving average and the 50% retracement of the recent rally.
Collectively, that’s the $166 to $171 area — a $5 range of critical support.
That range is either going to act as a launch pad and send the shares higher or give out as support and the shares will move lower.
If it’s the former and Nvidia stock pushes higher on the earnings report, let’s see how the stock handles the $192 level. That area has been resistance on two separate occasions this month and marks the top of the recent rally.
If it can clear this level, $200 is next. That’s followed by the $208 to $210 zone, a significant former support level.
If, however, Nvidia stock reacts bearishly, it could open the door back down to $150 or lower. Along the way, there is a gap-fill level at $157.82.
Should Nvidia stock go on to trade below $150, the low at $140.55 could be in play, followed by the 200-week moving average.
Trading a stock ahead of earnings is different from being an investor in a stock who can sit through the ups and downs surrounding a report.
Traders must be much more prudent about their risk/reward profiles; thus trading ahead of an earnings report can be nearly impossible.
After the print, we’ll see which levels become support and which become resistance. Then traders can construct their trades around these new levels.