Oversold Nvidia Stock Bounces After Upgrade

NVDA is on track for its worst month in 10 years

Oct 30, 2018 at 10:08 AM
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J.P. Morgan Securities upgraded Nvidia Corporation (NASDAQ:NVDA) to "overweight" from "neutral," saying investors aren't pricing in potential upside catalysts from gaming trends and the chipmaker's self-driving car technology. However, with the stock pacing for its worst month in years, the brokerage firm lowered its NVDA price target to $255 from $265 -- still a 37% premium to last night's close at $185.62.

This morning, Nvidia stock is trading up 5.7% at $196.16. It's been a rough stretch for the chip stock, though, with the shares down 33% from their Oct. 2 record high of $292.76. What's more, the equity hit an annual low of $176.01 yesterday, and is pacing for its worst October since July 2008. As such, NVDA's 14-day Relative Strength Index (RSI) closed last night at 25, well into oversold territory, suggesting a near-term bounce may have been in the cards.

In spite of these technical struggles, sentiment among analysts has remained bullish toward Nvidia. However, pessimism toward the semiconductor stock appears to be picking up. For starters, short interest surged 11.7% in the most recent reporting period to 12.95 million shares. However, these bearish bets still account for a low 2.2% of the stock's available float.

Elsewhere, the stock's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) sits at a top-heavy 1.80. What this means is that near-the-money put open interest nearly doubles call open interest among options in the monthly November series.


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