Chip Stock Charging Higher Ahead of Q1 Report

NVDA is trading within a chip shot of yesterday's record high

by Lillian Currens

Published on May 20, 2020 at 2:17 PM
Updated on Jun 24, 2020 at 10:16 AM

Semiconductor notable Nvidia Corporation (NASDAQ:NVDA) is chugging higher again today, up 1.2% to trade at $356.57, which is just a chip shot from yesterday's all-time high of $363.50. The equity is pacing for an all-time closing high today, just one day before its first-quarter earnings report, which is due out tomorrow, May 21, after the close. 

NVDA is going on its fourth consecutive close higher. The stock has its eye on its biggest monthly win since 2018, too, up 22% so far, thanks in part to a bull gap atop the $340 level earlier in the week, and solid support at the ascending 20-day moving average. Looking back, the stock's 320-day trendline deftly captured its mid-March selloff, launching NVDA towards a roughly 52% win for the year. 

NVDA Chart May 20

Options activity surrounding NVDA is relatively normal today, with 60,000 calls across the tape, compared to 36,000 puts. Taking a further look back shows that in the last 10 weeks, 0.63 puts were picked up for every call at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 95th percentile of its annual range, suggesting that while call volume is still outnumbering put volume overall, these bearish bets have rarely been more popular. 

There are still a few holdouts among the brokerage bunch, too. Though the 24 calling the security a "buy" or better represents the majority, five are still clinging to a "hold" or worse rating. Plus, the consensus 12-month price target of $326.42 is an 8.3% discount to current levels.

Looking even further back, Nvidia's last eight earnings reports show that the computer graphics specialist finished five of its last eight post-earnings sessions in the red, which includes an 18.8% plummet back in November 2018. The security averaged a next-day return of 5.9%, regardless of direction, during these past two years. This time around, the options market is pricing in a much bigger swing of 11.2%. 


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