Nvidia Chart Paints Picture of Technical Support

NVDA recently reclaimed the $150 billion market cap

Apr 1, 2020 at 2:34 PM
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Earlier this week, we profiled the 25 best stocks since 2009, based on annualized returns. A quick glance at the list -- compiled by Schaeffer’s Senior Quantitative Analyst Rocky White -- reveals it is heavily populated by one particular sector: semiconductors. Chip stocks have ruled the roost in the last decade, and leading the charge is Nvidia Corporation (NASDAQ:NVDA) with a 34.3% annualized return since 2009.

Present day, it's obviously a difficult climate for any stock to navigate, given the external headwinds stemming from COVID-19. But consider Nvidia's product portfolio for a moment. They operate as a visual computing company worldwide in two segments, GPU and Terga Processor. The GPU segment offers processors, which includes GeForce for PC gaming and mainstream PCs. The work-at-home and stay-indoors mandates put forth by the government will ensure the sustained usage of such products, allowing NVDA to, at the very least, stay afloat amid rampant volatility.

Let's take a deeper look at Nvidia's technical backdrop. The shares breached their 200-day moving average only once amid the broad market selloff in the past month, forming a hammer candlestick last week that could indicates a possible reversal. After bouncing off this trendline, NVDA reclaimed its $150 billion market cap level, while also keeping its year-to-date breakeven level at bay with a 7% 2020 gain. And longer term, the equity remains up almost 46% in the last 12 months.

In addition to that 200-day moving average, another layer of support to monitor is the $190-$200 area. During the most recent pullback to that range, NVDA's 14-day Relative Strength Index (RSI) dipped to as low as 35. The RSI has since picked back up near the 50's as the equity rallies, indicating upside momentum could be picking up.

Nvidia's options pits are a unique setup in their own right. For starters, NVDA has attracted some of the highest weekly options volume, with data courtesy of White. In the past 10 trading days alone, Nvidia has seen 61,026 call options traded during the past 10 days, compared to 55,408 puts.

Digging deeper, though shows that while calls outnumber puts, the stock's 10-day put/call volume ratio of 0.91 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 100th percentile of its annual range. This indicates that while calls have outpaced puts on an absolute basis, the rate of put buying relative to call buying has been greatly accelerated.

That's a lot of options-related pessimism that could unwind. Lastly -- and this is noteworthy considering the price action of U.S. equities lately – Nvidia has been more volatile than expected during the past 12 months. This is based on its Schaeffer's Volatility Scorecard (SVS) of 92 (out of 100.)

daily nvda chart small

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, March 29.


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