Simulation Update Stirs Semiconductor Investors

A long-term NVDA trendline is coming into focus

Managing Editor
Sep 30, 2022 at 9:26 AM
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Subscribers to Chart of the Week received this commentary on Sunday, September 25.

Chip stocks have taken the past five years by storm, and one of the largest semiconductors looks to be making some rumblings of its own. NVIDIA Corporation (NASDAQ:NVDA) comes in with a 12-month revenue (TTM) of $29.5 billion and a market cap surpassing $463 billion. That hasn’t necessarily translated to chart outperformance, though, leaving many options traders and analysts wondering where to go for their next semiconductor move. However, it looks like some fresh partnership news and a pullback to a key level on the charts have reignited the torch for NVDA.

On Thursday at its GTC conference, Nvidia announced that AEye (LIDR) – a leading name in lidar technology – and its partner Continental’s HRL 131 Long Range Lidar will now be available for testing and development on the NVIDIA DRIVE Sim platform. This new collaboration will allow AV and ADAS customers to simulate the fully adaptive lidar system in a range of autonomous driving edge cases and environments. AEye’s GM of Automotive Jordan Greene added that “it’s critical that manufacturers be able to test and validate these performance modes and the product’s performance in diverse situations, which NVIDIA DRIVE Sim will uniquely enable.”

The announcement was overshadowed by rocky day for chip and tech stocks alike; NVDA shed 5.3% amid Fed hysteria. This nonreaction to exciting industry news shouldn’t deter investors just yet. Senior Market Strategist Chris Prybal identified NVDA’s pullback had drifted to its 200-week moving average, a trendline that has been an area of support for the chip stock going back as far as 2015. He also pointed out that NVDA’s two-year return sits right at 0% at the moment, which could also be worth keeping an eye on as a possible support level moving forward.


Even further, NVDA appeared on Schaeffer’s Senior Quantitative Analyst Rocky White’s most recent list of stocks with the highest weekly options volume. Alongside big tech and chip names such as Tesla (TSLA), Advanced Micro Devices (AMD), and Microsoft (MSFT), NVDA has seen 3,565,482 calls and 3,331,504 puts traded in the past 10 days. Per Trade-Alert, the most popular contracts during this time frame were the September 130 put and the weekly 9/23 135-strike call.


As traders cycled through September – a historically bearish month -- it looks like options traders grew bolder with their bearish bets or at the very least tempered their bullish expectations to a weekly level. Amid all the broad market carnage in September, whether an industry leader like NVDA has finally bottomed out will be an underrated storyline heading into October.

Now could be a good time to speculate with options, per Schaeffer's Volatility Scorecard (SVS) that sits at an elevated 94 out of 100. This indicates that Nvidia stock has exceeded volatility expectations during the past year.


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